National income is referred to as the total monetary value of all services and goods that are produced by a nation during a period of time. In other words, it is the sum of all the factor income that is generated during a production year.
National income serves as an indicator of the nation’s economic activity. It can be calculated by three methods such as income method, value-added method, and expenditure method.
Income method is mainly based on the incomes generated by the factors of production such as labour and land. The expenditure method is based on investment and consumption, while the value-added method is mostly based on the value added to a product during the stages of production.
Formula for National Income
National income = C + G + I + X + F – D
C denote the consumption
G denote the government expenditure
I denote the investments
X denote the net exports (Exports subtracted by imports)
F denote the national resident’s foreign production
D denote the non-national resident’s domestic production
This concludes the article on National Income Formula, which plays an important role in determining the income generated in a country. For more such formulas and concepts on economics for class 12, stay tuned to our website.