National Income and Related Aggregates

In an economy, there are many products and services that are produced by the organisations and individuals in a year. It is not possible to add up all in their original state and therefore, need to be expressed in a common term which is money.

National income is referred to as the net money value of all the final goods and services that are produced by the residents living within the boundary of the country within an accounting year.

The following are the aggregates to the national income:

1. Gross Domestic Product at Market Price or GDP_MP : It is the gross market value of all final goods and services that is produced within the domestic territory of a nation within an accounting year. It is shown as:

GDP_MP = Net domestic product at FC (NDP_FC) + Depreciation + Net Indirect tax

2. Gross domestic product at Factor Cost or GDP_FC : It refers to the total money value of goods and services excluding net indirect taxes that are produced within the domestic territory of a nation within one accounting year. It can be shown as:

GDP_FC = GDP_MP – Net Indirect tax

3. Net Domestic Product at Market Price or NDP_MP : It is the net market value of all the final goods and services produced within the domestic territory of the nation within a year excluding depreciation. It can be shown as:

NDP_MP = GDP_MP – Depreciation

4. Net Domestic Product at Factor Cost or NDP_FC : It refers to the net money value of all the final goods and services that are produced within the domestic territory of a nation excluding the net indirect taxes and depreciation. It is shown as:

NDP_FC = GDP_MP – Net Indirect tax – Depreciation

5. Net National Product at Factor Cost or NNP_FC : It is the net value of all the final goods and services that are produced by the residents of a nation within a period of one year. It can be shown as

NNP_FC = GNP_MP – Net Indirect Taxes – Depreciation

Or NNP_FC can be defined as the sum total of all the factor incomes which includes rent, profit, interest, employee compensation during an accounting year.

It can be represented as:

NNP_FC = NDP_FC + Factor income earned by normal residents from abroad – factor payments made to abroad

NNP_FC is also known as the National Income.

6. Gross National Product at Factor Cost or GNP_FC : It is referred to as the gross money value of all the final goods and services that are produced by the residents living within the boundaries of a nation during one accounting year excluding the net indirect taxes. It is shown as:

GNP_FC = GNP_MP – Net Indirect Taxes

Or it can be defined as the sum total of all factor incomes that are earned by the residents of a nation living within the boundaries of the nation along with depreciation.

GNP_FC = NNP_FC + Depreciation or

GNP_FC = GDP_FC + NFIA

Where NFIA is the Net Factor Income from Abroad which is factor income received by residents from abroad minus the factor income paid to non-residents domestically.

7. Net National Product at Market Price or NNP_MP : It is the net market value of all the final goods and services produced by the residents living within boundaries of the nation during one accounting year.

It is shown as

NNP_MP = GNP_MP – Depreciation

Or, it can be defined as the sum total of all the factor incomes earned by the residents living within the boundaries of the nation during an accounting year inclusive of net indirect taxes

NNP_MP = NNP_FC + Net Indirect Taxes

8. Gross National Product at Market Price or GNP_MP : This is the gross market value of all final goods and services that are produced by the residents living within the boundaries of a nation.

It can be said as the sum total of all the factor incomes by the residents of a country during a year and is inclusive of depreciation and net indirect taxes.

GNP_MP = NNP_FC + Net Indirect Taxes + Depreciation

This was all about the topic of National Income and Related Aggregates, which is an important topic of Economics for Commerce students. For more such interesting articles, stay tuned to BYJU’S.