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    What Is National Income

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    Rayad Ali
    National income refers to the total monetary value of all goods and services produced in a country in a year. National income figures are used to indicate a country's standard of living, compare standards of living between countries, determine economic growth rates, and identify sectors for improvement. They can be calculated using the income, output, or expenditure methods, but difficulties include only measuring income not wealth, potential double counting, and excluding the informal economy.

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    What Is National Income

    Uploaded by

    Rayad Ali
    35 views3 pages
    National income refers to the total monetary value of all goods and services produced in a country in a year. National income figures are used to indicate a country's standard of living, compare standards of living between countries, determine economic growth rates, and identify sectors for improvement. They can be calculated using the income, output, or expenditure methods, but difficulties include only measuring income not wealth, potential double counting, and excluding the informal economy.

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    What is National Income

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    National income refers to the total monetary value of all goods and services produced in a country in a year. National income figures are used to indicate a country's standard of living, compare standards of living between countries, determine economic growth rates, and identify sectors for improvement. They can be calculated using the income, output, or expenditure methods, but difficulties include only measuring income not wealth, potential double counting, and excluding the informal economy.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    35 views3 pages

    What Is National Income

    Uploaded by

    Rayad Ali
    National income refers to the total monetary value of all goods and services produced in a country in a year. National income figures are used to indicate a country's standard of living, compare standards of living between countries, determine economic growth rates, and identify sectors for improvement. They can be calculated using the income, output, or expenditure methods, but difficulties include only measuring income not wealth, potential double counting, and excluding the informal economy.

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    What is National Income?

     National income refers to the country’s income via the monetary value of all goods and
    services sold in a country for the financial year.

    What is the national income figure used for?


     he following are the uses of the national income figure calculated for a country:
     To indicate the standard of living in country – the figures can give an overall idea of the
    standard of living for a country. Comparison of the figures for one year against another can
    reveal if living standards have increased or declined e.g. National income figures calculated
    for Trinidad for 2019 can be compared to that of 2020.

    Uses of National Income Figures


     To compare standard of living with other countries – these figures can be used to compare the
    standard of living of one country to another e.g. national income figures for Canada
    compared to England or Trinidad to Barbados.

    Uses of National Income Figures


     To determine the rate at which national income is growing – comparison of a country’s
    national income figures from one year to another can also highlight the rate at which a
    country national income is growing or increasing.

    Uses of National Income figures


     To highlight the sectors of the economy needs improving – these figures can indicate to
    decisions makers which sectors need more capital investment in order to improve such as the
    manufacturing sector or the agriculture sector, health, education etc.

    Methods used to calculate National Income figures


     National Income figures can be calculated using one of the three following methods:
     Income method
     Output method
     Expenditure method.
    Income Method

    This method takes into account the income received from the factors of production :

    Land receives rent

    Labour receives wages/salary

    Capital receives interest

    Enterprise receives profit/loss.

    The Output or Product Method

    The output method calculates national income by taking into account all
    output produced in a country being careful to add the additional value of
    output at each stage of production.

    For example, the producing of a dining room set. At the primary stage the value of
    the lumber is considered, at the secondary stage the set is produced thus only the
    INCREASE in the value is counted, then the tertiary stage where it is sold, the
    increase in the final retail value is added.

    This will apply to all other output produced .

    The Expenditure Method


     This method calculates national income figures by using the total value of expenditure by
    consumers, firms and the government and foreign demand for exports (x) less imports (m).
     C+I+G+(X-M)
    Problems Calculating National Income Figures:
     Income not wealth is considered – the value of assets, savings in a bank are not used but
    instead rent from property and interest are used;
     Double counting – this occurs when total value of output are used instead of the additional
    value;
     Informal Economy – jobs where no record of payment is not considered or only payment of
    cash is made such as house keeping, baby sitting, jobs on the side;

    When the above are not considered when calculation is done, the figure for national income
    would be inaccurate.

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