The method through which national income statistics is prepared and compiled is called national income accounting. In view of this, every country prepares statistics on national income as well as its various facets. Increase in national income is tantamount to economic growth. In other words, national income is the yardstick of measuring the growth performance of any economy. National Income Accounts :Įconomic growth of any country is measured by its growth of national and per capita incomes. Using these three concepts we will show that national income is “the total flow of wealth produced, distributed and consumed.” II. It is to be kept in mind that these are not different concepts.Īs these three imply the same thing, these will be used interchangeably in the following pages. The concept ‘national income’ has been interpreted by economists usually in three ways. Factor earnings are incomes of factors of production.” In the same vein, Gardner Ackley defines “National income is the sum of all (a) wages, salaries, commissions, bonuses and other form of incomes, (b) net income from rentals and royalties, (c) interest, (d) profit.” Profs Lipsey and Chrystral say that national income, in general, is “the value of the nation’s total output and the value of the income generated by the production of that output.”Īccording to Froyen “National income is the sum of all factor earnings from current production of goods and services. The National Sample Survey defines national income as “money measures of the net aggregates of all commodities and services accruing to the inhabitants of a community during a specific period.” According to the National Income Committee of India” A national income estimate measures the volume of commodities and services turned out- during a given period, counted with duplication.”
National income is a money measure of the value of all goods and services produced in a year by a nation. What is clear from the above discussion is that Marshall’s definition seems to be more comprehensive. What we produce flows into a reservoir what are consumed is drawn from the same reservoir, from the joint output of the community.” Cairncross says “The national income is, in fact, simply the output upside down. He argues that if a man marries his maid-servant the national income is reduced since he is not supposed to pay any remuneration or wages to his housewife who was paid before marriage. This definition involves certain paradoxes. Pigou “National income is that part of the objective income of the community, including, of course, income derived from abroad which can be measured in money.” This definition is rather narrow as it does not include unmarketed goods and services for which no money payment is involved. In Marshall’s words, “the national dividend is at once the aggregate net product of and the sole source of payment for all agents of production within the country.” Thus, what is produced in an economy is distributed among the various factors of production. This may be construed as national dividend as a flow of goods and services but not a fund.
CIRCULAR FLOW DIAGRAM PLUS
The term net refers to deductions from total gross produce in respect of depreciation and wearing out of the plant and equipments plus additions of net income from abroad. Marshall defines national income or national dividend in the following way: “The labour and capital of a country, acting on its natural resources, produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds… This is the true net annual income or revenue of the country or national dividend.”
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