National Income

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National Income

Back 1

The income accruing to the permanent residents of a country from current economic activity during a specified time - usually a year

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Income Method to find GNP at Factor Costs

Back 2

GNP @ Market Prices + Price Subsidies - Indirect Taxes

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Income Method to find National Income

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GNP @ Factor Costs - Depreciation

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Expenditure Method

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GDP = C + I + G + X - M

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Production/ Output Method

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Add the value of final goods and services produced. Easily attained from tax records.

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Precautions for Income Method

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1. Transfer payments are excluded as no FoP has been supplied.

2. Benefit-in-kind included as a payment for labour

3. Contributory Workers' Pension included as payment for past work

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Precautions for Expenditure Method

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Second-hand-goods: Purchase should be included if the new is not now included

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Precautions for Output Method

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1. Double counting.

2. Only goods and services counted, ie not housework

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Net factor income from rest of the world:

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The difference between incomes earned by foreign FoP in Ireland and sent abroad, and incomes earned by Irish owned FoP abroad and sent back to Ireland

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Subsidies

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Payments to a producer to help reduce the cost of production and increase output.

EG: EU pays farmers the single farm payment.

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Incomes-in-kind

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Income in non-monetary form OR payments made in the form of goods or services

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Gross Domestic Product @ Factor Costs

/@ Market Prices

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The total output produced by the factors of production in the domestic economy, irrespective of whether the factors are owned by Irish nationals or foreigners valued at payments of production/ valued at current market prices

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Gross National Product @ Factors Costs / @ Market Prices

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The total output produced (value of goods and services) by Irish owned factors of production in Ireland or elsewhere valued at payments to the factors of production / valued at current market prices

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Why is GDP higher than GNP?

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1. Repatriation of profits

2. interest on foreign element of national debt

3. remittances of immigrants

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Which is a better indicator?

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GDP is a better indicator of the level of economic activity in the country and GNP is a better indicator of the standard of living

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Gross National Income

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Is comprised of domestic and foreign income earned by the resident population of a country

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Uses of National Income Statistics

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1. Indication of altercations to our standard of living

2. Comparative Mechanism

3. Formulating Economic Plan

4. Evaluating Economic Policy

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Limitations of National Income:

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1. Inflation/ Deflation

2. Employment/ Unemployment

3. Levels of Taxation

4. Level of Social welfare

5. Exclusion of important activities from calculations of NY

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Problems with the international comparison of N.Y.

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1. Foreign exchange translations

2. Market orientated economics

3. Length of working week

4. Different countries have different needs