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National Income

Measuring National Income

TermDefinition
What is National Income? is the income accruing to the permanent residents of a country from current economic activity from supplying the factors of production during a specific period which is usually one year
What are the three methods of calculating national income? The income method, the expenditure method and the production/output method.
What are the precautions when calculating the income method? 1. Transfer payments are excluded as no factor of production has been provided 2. Benefit-in-kind should be included 3. Contributory workers' pensions are included as they are a payment for work done in the past.
What are the precautions when calculating the expenditure method? Second hand goods - The purchase of second hand goods if included in GNP when new is now not included
What are the precautions when calculating the production/output method? 1. Double counting - An economist must only calculate the value added by each firm and not the total output to prevent double counting 2. Only goods/services sold in the marketplace are included
What is Gross Domestic Product at Factor Cost? The total value of input or expenditure within the country as a result of engaging in current economic activity in one year, valued at payments to factors of production.
What is Gross Domestic Product at Market Prices? The total value of input or expenditure within the country as a result of engaging in current economic activity in one year, valued at current market prices
What is Gross National Product at Factor Cost? The total value of output or expenditure valued at payments to factors of production, produced by Irish-owned factors of production
What is Gross National Product at Market Prices? The total value of output or expenditure valued at today’s market prices, produced by Irish-owned factors of production, before any adjustments are made for taxation, subsidies or depreciation
What is the difference between GNP and GDP? Net factor income from abroad
What is Gross National Income? GNI is comprised of domestic and foreign income earned by the resident population of a country
What is Net National Product? NNP is the total joint product of the resources of land, labour, capital and enterprise for a period of time (usually one year). It is the same as national income
What are the uses of National Income Statistics? 1. Indication of alterations to our standard of living 2. Comparison mechanism 3. Formulating economic policy 4. Effective research 5. Evaluating economic policy 6. EU budget contributions/benefits
What are the limitations of National Income Statistics? 1. Population distortions 2. Inflation/deflation is not taken into account 3. Welfare is not taken into account 4. Employment/Unemployment 5. Levels of taxation 6. Hidden social costs 7. Distribution of GNP 8. Government services at cost price
 

 



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