Meaning and Definitions of National Income

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Meaning and Definitions of National Income

Published by: sadikshya

Published date: 18 Jun 2021

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Meaning and Definitions of National Income

The meaning and definitions of National income refer to the total income of the nation in a particular period of time. In other words, the final outcome of all the economic activities of the nation during a period of one year, valued in terms of money is called a National income. The National Income is a vital macroeconomic variable that determines the business level and economic status of the nation.

According to Marshall-“The labor and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. This is the true net annual income or revenue of the country or national dividend.”

World Bank defines national incomes as, “Gross National Product measures the total domestic and foreign by residents. It comprises gross domestic product plus net income from abroad which is the income received by residents from abroad for factor services (capital and labor) fewer payments made to non-residents who contributed in the production of goods and services to the domestic economy.”

The United Nation has defined national income in three ways:

1. Net National product, i.e, an aggregate of net value added in all branches of economic activity during a specified period, including net income from abroad.
2. Sum of the Distributive Shares i.e, the aggregate of national income accrued to the factors of production in a specified period.
3. Net National Expenditure, i.e, the aggregate expenditure on the final consumption of goods and services, plus domestic and foreign investment.

Based on these definitions, the main features of National Income are:

• National Income is the net amount of income accruing from all economic activities like agriculture, industry and trade, transport, services, etc during a specific period of time, usually a year.
• It is the result of the combined contribution of all economic resources like natural resources, human resources, and physical resources.
• Net factor income from abroad should be added to national income.
• It is a flow of final goods and services produced from all economic sectors in a country.
• There is triple identity; National output =National Income = National Expenditure.