Chapter 1 National Income

Topics to Study:
Basic Concepts
Calculation of national income using Income Method
Calculation of national income
using Expenditure Method

TANETEE
Calculation of national income
using Value Added Method
Precautions of calculating national income
using (3 methods)
Steps of calculating national income(3 methods)
Problem of double counting
Factor and Transfer
Payment
Real and Nominal GDP

GDP and Welfare

Difference between:
-
Stock and Flow
-

Leakages and injections

-

Money and Real Flow

Final and
Intermediate Goods
Items to be included in National Income

Items to be included in Domestic Income

(10 M)
 NATTONAL LNCOME
t Baaic Lontepi

K+De
Deperiualian is alsa komen 2iumphm ixead lapitnp
and Replacement_Lastt
KOcbeuiiathorae Ne
+NEIEAAN
maeatico) Nahana! Cy det ackou-taianu
to buoad is pive
SAFEA Zthen ihange the
eIEA-Net4ac Sanne mAbuoaol
NEIeA=aLameam tbuoad Snname tn Ahead NELFA
tNIT
Ci) tactailest le) Masket_ Paice lAP
soIIL

NIT=Net Aadiyect Tax

NITinclinect Tax-Subsidies
 Masvement dd Natima) atnumme NNt

nLeme ehoa2 pendtug had Nau Addes Mhed

ADfe
DAP
meMethbda(DP
Lonpensatim Openatkg eplus Mixeo tnLame
Employee by aull emloycd
labouu Jnramne abitainLmme
Phagesand Salauies Rerd Jokyesst
(hah and kiad Proli
Employe% tontkihutin LUnditihutl Leicberdhion Oideno
2sodial sicut
Achem2e A let Retained
EaxningL
 xpndie MeHhod laDeMelNDPAp

Lnsunnphon hnal
Expenlihuue NeE Exporl
Cabita! f2)aatae LEputimpeut)
Bisatz Einal Netllzuos Anveatment Ner-Impor giue
ther thange algrto-
ake net Exper
Lmaumphon
txpencl?hwe LugsslsNed Domeshe Iovene4 Invesnent
Chape instpck
rtounment hinal maton cloiag Atock=operin
Lmaumphm2 Ateck
Ppenaliuuue
AUDJA f-Luoss
Keliolentha Buines14 Rablic
teed oeatment
neanoent Aaesgen
Nd tn ecornd ement osa alues ae,giea then the tesult
Expendlinika Mehed a i l b GDnp_and if Nek values axe givn hen he
Hedult uwil be NDPAp
 Value Added Yetho hizuction Metha?
CaDPe GNAme)

Shp1*
Nalue g Orlpst(Vo)=Salatchange a soek
Sep 2
GGD4pCH avAMp Ltess Yallue A Lm= Yalue e oukput-
Ipteinidiatu Lstid
Sales bie x uanliiz
=
Salia omesti Salrs pot
ICincludes onlu kamoiiialApaKes
Tc= hmchasn elz nat fied asstr
smatiuial fsam lemeatic ogauket+ tmpeut
A
 hesuy d National hrrne
EDiaihins do difpuont gguegalz tan b euned
suuies
24tauling Meney value e_all he nal guDde and
PHadiuced

LLounhn9 Yeay_
Incased Natioal by the HeialentA heL0untuy in an
SHia the de euite theLouty in on
In ta4e Donasie
ALLpunhing

YaLe Masket hie

Anaae Yaliedat ater Cot

In Case ps nclusive depsHeciahca-

Eaie bepneciakern

Dameshc inLomå LADPE) Jtis he money value e 1all the 4inal gunds
telbriysty h e Louauy ja an.
and duuuicekpledured uoiHain the dmeaie depieciatina
accounha Yeau lued at-ecteu Las and Eeduaie
NgHonal NPe) t the_mmey yalue d all he inal gnds
duirespbduced bythe sealdera c the_couaby inan accaunhing yea.
and
valued at facto Lst and excluaive depreciatien.
 nme Mehod 44ctelayment mahod
NatianalInnone Can bejned a4 the dtm total dactet 1nLeme
laun by h e numak Hesidentd the countiy dueingan accounisg y e a

nucatis eganding ome Metha2:

Tiansler paymena aHe not inludea e paymenti Like pld-age
pengfonas Hholauhipd, lhauity aa Ahoula bi ignerecl as
docsnat_Contiibdis nanyppaehacivily
Ilegal JneameA au nat nluded daneme juonh illegal actiuisies ike
sduagliag, thetgambliag ad hlacksoney hauld hot b iacuded
i ) Lmmiaim_en dall anapAchagh adicmd hanglgord Ahaugh dalu
and pu4chase adecmd shdgonda aue lot Nluded in natiana!inLame
Lundiu peuoduuchion Methal Lammi pzd a dalsand puushaand
thesugnds dhoud benided as his id seusakd 4or factee dsvites
Agent
Ciu) akuagg baide nlu andpuuchaazd Ahaueslhenda 2 Any InLene
aiag cadal daldghakeshanda et ot ialuded n mioal fnLomi_
buta LmmikAan au brokexage chped by eget _iu_Lonsiduted
a4 i e iacameanalhenceVi iz artuda ia natiaal Inme
v a ai Laaia2 tny capital qain auislog-m he Malu d 4ked sasulá
Lkeouue buildia esheuld ant-_k Tudsdbecausihe ivaluc d
sAuchadeut_haa alueadybun talen. 2ato_accouzt
 dnLume nm_windlall gain Soamewm inaLail qain_like loteres
Inene
dhould he avoicdeá a duch inncme doeanot Veadd o aay pueduuin
atiuity
Ependtue Mhnd lanPue)
Nahamal sdniame_can be delined as he anntnl dexpendhwe m he
Puchaaugfinal genda and auuvices puddieed by jusidenta in he ecanomy
clusing an acaing ea
Zeauutiona Hegaualiag Ependitu Yehod-
()ntmediat Expendiuue twiu not be inlded as in the oationa!
Snuamejt iu alueadyncuided as4ina! expendlituue,iinkumidiaz
Bependihues a then_itueil_leáa o double Louatigq
audi
expeclihuneLshichmay Heault in DveNeabimatiam 4-nationa nLam
handgmdshould npt
LDSegna hiaaondasLbendiuue nade cn secmol
Dmclued i h ë aational iauome d uwLent HeatCs iL hadalneady-
n laldeelin theAationaL inuameq hat yeay in ohiih they_iOeKL
Pchagd
be iauuded Auh
)mpuLA ELpendtu= Un_accauntproduchim aheuld
phoducia del Loatumption, suy LonsumLa sukwies ouone e l -
a4
 L Expenaihuueo ainsespeymena2hia dhoud se exidsded aa thes
aue ulativaL TLanafeus égainst Lhich E n d a n d sLUÍCes uA
pDvided in eun..
Apenditue_mAhauealbmda
bendi= Ependiu buig and sllag
hest_Anly leada wtAanae e ane Pender/instihsim
anothe dd heae expendihbue ahaull ae teicludled.
vi Epndiuve cn tinal 4ewds-Dpe ade
aily buintladedhiaill he on fiaal lenda shauld
le puoblem e ukle
Loiuahng.
Yalue AddedMehacd LadkceimMethad LDPAe
wotiaral dntane Can ocaa2ned aa dhe 2anket value
and svices puoduced bAheuealdená Aiaalgmdu
he Louatiy_dusirq an
attounigg jean lndeshis yekhod, natiomal
aaduiag iaiknae s eaiapatid
eanibiten eachphoduciag urit
ecauhc ueaaiAPA aluAddo Heheg2-E
D yalueina Culput2 Sn sdun ausid he psahlern
Lourt
LAudtn% onli
the valuuaial 4 dauble-
oulput ahauld bs:takea
 piuchasasicmal handqn2da
Li 5ecand hand 900ds= Nalue ddaland
eauned Mdal buuchas 2 inksd
ia Not indudkd, buE commisfra
Amputid luu padiucton
mDutid valuesdgocla s u i e L
imputid valu
gonds zet Ail_Lorsumpim is inctulrelsbz he
Dotintudol aa it ia
pueduchin dssicés ouasl uLes.
no pansiblp_esiatz he val 2h
Impi+hd Reat Ampuid_uuenti oney ocupied housra should ou
zolluded.as all hausu have ental Valut
Value_ddhhumediatundsi a i aot incdded un dhe caialtme
Value_added bicausvalueAiatetmLdial Jerdd i uelleced in
hé
Value aal gmds-Ai
N) Lzmniaaion and biekeuthg Cammissiomand beoketeae euaed_endal
and pwtchasu ucgm handqUmda and prape bucma h e pau
oatonal auoone betause t is a dactei inuanhe.

hoblem 4ouble Counti

lounhing tne aluei a prdductMue han me in he measuuiaent_OL
uimahom atima! iniome_iaCaAled dauble Louniag.
B he ginalgndgeea nn diferent puocesses AndpaaaatHtagh-
many tagis kd hui is aways a daggeu _drat ik value may be
indhded a t eenyalage_and keauuit nay bu dauble,buible al maniold
Lounhn9
 To avoid dauble couikig, tw0 mehade ane adopkd2
L)JinalLodud Hekhod Aurdigg to thia pehzod valueanl ina
gDds and diwies auefo be consideedphie Latmaligq he èDA
bWale_Adiud Mehod Aczesding thi ajehael, dun tal value
added ty each tiumahaddbetaken le eshimtizgADP
ample-
uandacion
tmens llh to Elouu HU
Nalusduh Vaduueg.snpuk yaluu Adda
Elou U srlls to Bakeu Rs 33ao
Bahen drlla to lozumeHs RA 8aoo
Total suatuelAdded
A20uo
Ccilan Hou
Moneg E Real louo
=

Real Hop
fache
otthhold
Seuures4
epel Svwc
 heusshelda,
duuiea lkand, lakaus, capital, E a p i J u m _
hepauw Hacho and
gemda_an dwicea4 jiu2
d i u i c e s f u mmiuma

niuma dnd_cosareapmdiaq
Haw
o"houauhelds ia knaonas Heal 4How.b h i e l lo
tisalso kaau2nas puoduclauz e
6a
Heue atdium qExchangeie god
#oneu Fou
Kum
Hausrhad
dicke

houshel44
rom_hauuholda
anadinHetiun cametauy paymenta
thenack diuRea
fin gzaîinah the gaods aad uice4.
to
i alokncbnaa Nanina! low
Heernediuna e Pxchange_is m

1hiioeen shk and f

iee
Hou
vasiabl lhich
ua

Ba Stock uaAnyecamamfe
ecmamiL vasiablh which caludatid duuin4 apeuiod.
1MeaningAny
calulalid atapawiala
 -StDck
How-
Brais

Point ime ippe

-Stati LomcepE ynamacmiepE

2 NatuKe dinnend
Theu ik_ro timu lmenaion|houeie imm
Oimendn
Amount monH hlalz in . zen oatiu in
HExamplea
tank etz

_2ypuens bitween kcakagas and kchaas

Baais Aakages jcchems

.AeanisA heauaue thasuzla aniables heat ane hae flouo vaiables

Lwhih hau a nepadie innpac 4ohich cauas an incueaas iathe
m the eo aduitior2
inrzieguinba genwaion-
2. Caah ttuo ioihduaula _money t s addition Many0-
om the iculas flas q he ciuculan tlou ndome
3. Lxaple uiayi,Sepeut, Taxes clz ueamed Epexta, tyoveunmentE
ExpendiHnL"edz
 and angA PEDe
Aeence Bveen acho Aneome
ucteyInlme
Baaia
Heceived wiHov
ueceivedwihouE
E
tA he inLame
u Hhe inianme
1-Meaning-
jsYeaninA elers nfacte intame neceived 4enderiag any dUuie Selliag.
aendzsine
Haseiac poducoa 4 bdoduà
facke siwices e_slligg a pibdtany incyuded inhe Lalcula-
lctotian_e i k nat
2Aaduaimtis induded in the h m naiamal Jnomi.
oationaL Anuime
t 4 eaunina Lniei +ui HeceiptLomept
3. CanepE
4Dhwlame t isalsa kaonad6atual Snuom t t i alao knouonas unilatiralInm=
5Example Rent pue ageetu Oldoge peaaton, chaty granta et
Lxenca buhween eal_and hcminal aDPaDP at Lanstant and LusLnt LUiLL
badis Keal aDP Nominal CadP
1Meani h e alse d cuxaent Oukput Eis he valuuduNrnt_o1alpa
ot hastuea piies a t uHHLnt yeat pLeA
Akuaaive alAn àlan kaaon as _GRP at i n also kaouon as CDP at
Name- Condtant biies Crunt biies
 Keal tDP Nomina 610P
Baaio
3:thange l l inw eass ony when cutprut gat2il Taueau eihu ohen
and suuicea nieasta Qutpuinmeauot_Cument
aciceU.
4. Rlble t conaidlexeol as kelable iadex e 4 not Heliable index d
Sndex cmonzi gAooh ard wellaue Lcanoii uooth.and welaHe
5. Sllee net inluenud by 1 u 1hienud b inlaim
sollahonlL

Lonassia2 Real aDP=AominalhaDP

enent Yean Jalex -

Nomnal aaR Ree_ADP x_lwsent Yeat Index

EGDP Aellaeu2
J+Ahouss changefn tiDe du o charge in puize level. GDP dellatat shox
edpet 4 fallai bDP Dueu a_ pul t i e . G4DP dejlate egual te
Cutneatjeay index.

GDP Delakoy_= NominolGDP x lo

Real_cDP
E Kdatimahi bitweeaGGOP and ueaue
OJen_GDP u_onaideued as an iader d Aocial iolake bjenually an inueass
in aDP imblies inLueaae in the level sodal relyate peapleBatit
Qo alsays tiuu Thene ave exeptiana hiz
s
ORstibutim_dGDP h e intnneoiin he Lounlky iis uAequual
dsteibulid iE.few beiaa hollira B_naximum iuiAduneshea
dodal ving Lamám perarauilnat impraeofh inuucasn
n
aDP. Thegahbcttseen haiedda have noti nay _expand.
6 ) Lozpesitio cDe heLZAzreaar in aDe ia ueo pueduieae
Áoally unsankd puoductaNika dldenne £aiipmeatk, asms liquwra etTs.
theasch intweaa inDP A Aet he inclicadeae_Loelae
NomMonetau kcharad Ja olndian ecanemy,nm:moñetauyexchanges
opakkela,ohe~e-
2ue siEU zeudELag i uutal aueas_and uneeganicud
he baymeata a opadia kind but hesu au net ecetded sa
GADP Hematns undenesimatrd. tenu_GAP doeen't swres as a A
Inder e
dEcebaral uadaiaa 1th vaisu in bDP hesLniL bu uiss in.
ndistzalzagim and Lmbanizatan há uiLL_LaÍe polluäims.
ith aRPtheue 2iLL be ccoeglcal degtadakn whA
will ueduie Loelfane he.peaple
 E t e
nlHea
u a a l i i e
Huus n the bnelita_a dimio an indiuidual
Lau4 tn anotheu_iHanut_any puie toiiiAaa alsn be seleured
bad inpudt an_achiiih4iHhaut a pena/ty Impa
PvhesnaliHe iahat accaurkd in the tndex aoia! obllase
n eumna aDe. tunallea de vahaue any akok in
shich he Canba_boyght osol N

asiti Akunalies Negatie Pteznolties

GaDP i l l undeueatimat. he aDPusiU_aeglect haau
actaal wellae dLounti hauma
Pxanble 12su 4_Publte N brampls2 polluian CHealid
Pauha byumokag.

#Henu huiweenLtnalo and Snkumediatz lyonda

Basis Hnal qoda nkanedath geeals
LMtanlng ALgmda uehich aue ud das LinalHLgnd sosichaue uaud eltu
adaumpin_o eu fiaal inveatryente usthu PLwductim oufer
L4esal inthe sami yeat
oduhinnal unds do aathasu thHoughSnkumudalk qsodspau ~hogh
buoess ndithm_pueuss odluchon hece
 Basis iaal lycods Iatumediatr God
3tushuThtyaue uud den_final
Vs consiumphicn podactin
H.Inclusim hey aue induded in estimaiion Theaue not iochudedin-
in sNPE4nalenal inte atima m nationa Inume
5Ecarnblesichusdice, milk by th uchanL nik hy Autauwant
LanaumeHá, machîne puulhasie oqachinepuakaaid by uo
e-kal

omesbietuniey nea
indudesi
la) alihtal unatiena da eadt includigg_watuu baunalauies.
(6) Embassies and aumy Alishmenti h the_LoutyAinuatidabuoad
Ldheueas4gnegodie and aumy ahblshments lotatd i that
Louily aie ludid
lOMouing obieeta Lke aiucualk,ship c , Lohih aus apiuahd by-Heaiderii
la)_ishirg wosaela,oiaad natnakgad igs_and tloakigg plafeumsihatd in.
iahunaralatiuand epmatN by aesidonti
Kesideat al outy
A Heidercada LounlHy _doea notalunys Mean the uihzen h a E ounly
A Huidenis dsaíal n u a pekao th odinauily Meside in_a couty
And Ohase ceie aecmomiz inkhealies io ha Lountza
Lut- uukally a
me feau i Yaten hepupas amlning eaiden-=
ialcahua da petac2
This ul 1yean does not abblies to haollouoine QLLo
La)LyounmentEmployees
lb Lempanies Dpekaing Out
Hehiskund Laar in which itis
ODUand Helatid ganisahoma.
le) Employees o 12sd. and Relald TME, WIo, Ltc._
Oaanisalion