Gross Domestic Product (GDP)
Gross domestic product is the total market value of final goods
and services that are produced within a country
during a year. These goods and services may be produced by both public and
private sector and the value of them is measured in terms of money. It should
be noted that GDP includes only value of those final goods and services that
are produced within a country. The remittances send by workers from abroad is
not included in GDP. They are included
in gross domestic production of that country where they work. In addition, when
GDP is calculated on the basis of current prices it is known as nominal GDP.
While on the other hand, when GDP is calculated on the basis of constant prices
it is called real GDP.
Gross National Product (GNP)
Gross national product is the total market value of final goods
and services that are produced within a country during a year. The remittances
send by national workers from abroad and the value of net factor income also
included in GNP. The value of net factor income is calculated by excluding the
value of imports from exports. In order to measure gross domestic product (GNP)
the following expenditures are added together.
- Goods and services produced by government.
- Personal consumption on consumer goods. For example, purchasing durable and non-durable goods.
- Net exports of goods and services (exports - imports).
- Total gross domestic private investment, such as purchasing capital goods by households or firms.
Net National Product (NNP)
Net national product is the total net market value of final
goods and services produces during a year. It is calculated by extracting the
value of depreciation allowances of capital goods from gross national product
(GNP). We use some capital goods like machinery, equipment, tools, etc. during
a year for the production of goods and services. These capital goods lose their
value being used which is called depreciation. The depreciation is deducted
from capital goods. Therefore, NNP is also known as National Income at Market Price. NNP can be expressed as:
NNP = GNP - Depreciation
National Income At Factor Cost
National income at factor cost which is also known as National
Income is the sum of incomes earned by the four factors of production, such as
land, labor capital and organization. The incomes received by the factors of
production in the form rent, wages, interest and profit. The rent is received
by land, wage is received by labor, interest is received by capital and profit
is received by organization. National
income at factor cost is calculated by extracting the value of indirect taxes and
adding the value of government subsidies at NNP. National income at factor cost can be
expressed as:
NI = NNP - Indirect taxes + Subsidies
Personal Income (PI)
Personal income is the total money which is received by
individuals or households of a country during a year before payment of direct
tax. Personal income is calculated by
extracting the values of corporate income taxes, undistributed corporate profits
and contributions for social security from national income while adding the
values of government transfer payments, transfer payments from abroad, and
donations made by business organizations in national income to arrive personal
income. So personal income can be expressed as:
PI = NI - Corporate income taxes - Undistributed corporate
profits - Contributions for social security + Government transfer payments +
Transfer payments from abroad + Business transfer payments
Disposable Personal Income (DPI)
The income left after payment of direct tax from personal income
is known as disposable personal income. It is that income which is actually
available to individuals or households for consumption. It can be expressed as:
DPI = PI - Personal direct taxes
Generally, the whole part of DPI is not spent, some part of it
is saved. Therefore, from the approach of consumption, we can say:
DPI = Consumption expenditure + savings
0 comments:
Post a Comment