NATIONAL INCOME ANALYSIS

DEFINITION:- It is a science of measuring the aggregate output and income of an economy OR National income is that part of the objective income of the community including of course, income derived from abroad which can be measured in terms of money.

IMPORTANCE OF NATIONAL INCOME

1- Help to check the level of production on time to time.

2- Explain the immediate causes of level of production.

3- Share the long run course which the economy which the economy is following

4- Provides basis of formulating and application of public policies to improve the performance of economy.

CIRCULAR OF NATIONAL INCOME

-From produce goods and services sale to house holds.

– House hold produce resources and raw material and sale to firm.

– Firm made payment to house hold against their service.

-House hold made payment to firms against their goods.

MEASUREMENT OF NATIONAL INCOME

Some of all factors of payment made against production in the economy.

METHOD OF COMPUTING NATIONAL INCOME

1- PRODUCT METHOD:- Economy is divided in various parts of production. Production of each part is computed, adding the value is called Gross National Income.

2- INCOME METHOD:- By adding the income of all individuals in a country during save period.

3-EXPENDITURE METHOD:- By adding consumption and investment & expenditure of all individuals & Govt.

PROBLEMS OF COMPUTATION NATIONAL INCOME

1- lack of statistical required information.

2- Double counting problem.

3- Unpaid services (Housewife, sewing, house painting by others etc..)

4- Foreign Firm income.

5- Untrained people of work of data collection.

6- Illiteracy of masses

7- Second hand sale

IMPORTANCE OF CALCULATING OF NATAIONAL INCOME

Calculation of national income is very important because of the following reasons:

1- It makes easy to judge the performance of economy during a given period of time.

2- It helps in assessing the economic freedom and welfare enjoyed by the people.

3- It helps in making inter- spectral comparison

4- It is very important for any economy, which wish to develop as national income acts as yardstick and helps in developing economic plans.

5- It shows how income is distributed among various categories of people.