INTRODUCTION

In an economy, different productive units produce various goods and services during a period of one year. Such goods and services cannot be added together in terms of quantity. Therefore, these are expressed in terms of money.

GROSS AND NET

  • Gross means the value of product including depreciation.
  • Net means the value of product excluding depreciation.
  • The difference between these two terms is depreciation.
  • Where depreciation is the expected decrease in the value of fixed capital assets due to its general use.
    It is the result of production process.
    Gross = Net + Depreciation Net = Gross – Depreciation

NATIONAL INCOME AND DOMESTIC INCOME

National Income refers to net money value of all the final goods and services produced by the normal residents of a country during an accounting year.

Domestic Income refers to a total factor income earned by the factor of production within the domestic territory of a country during an accounting year.

The difference between these two incomes is Net Factor Income from abroad (NFIA), which is included in National Income (NY) and excluded from Domestic Income (DY).

Where NFIA is the difference between income earned by normal residents from rest of the world and similar payments made to Non-residents within the domestic territory.

NFIA = Income earned by Residents from rest of the world (ROW) – Payments to
Non-Residents within Domestic territory.
NY = DY + NFIA DY = NY – NFIA

BASIC AGGREGATES OF NATIONAL INCOME

1. Gross Domestic Product at Market Price (GDPMP ): 

GDPMP  is defined as the gross market value of the final goods and services produced within the domestic territory of a country during an accounting year by all production units.

  • ‘Gross’ in GDPMP signifies that depreciation is included, i.e., no provision has been made for depreciation.
  • ‘Domestic’ in GDPMP  signifies that it includes all the final goods and services produced by all the production units located within the economic territory (irrespective of the fact whether produced by residents or non-residents).
  •  ‘Market Price’ in GDPMP  signifies that indirect taxes are included and subsidies are excluded, i.e., it shows that Net Indirect Taxes (NIT) have been included.
  • ‘Product’ in GDPMP  signifies that only final goods and services have to be included and intermediate goods should not be included to avoid the double counting.

2. Gross Domestic Product at Factor Cost ( GDPFC): 

GDPFC is defined as the gross factor value of the final goods and services produced within the domestic territory of a country during an accounting year by all production units excluding Net Indirect Tax.

GDPFC = GDPMP  – Net Indirect Taxes

3. Net Domestic Product at Market Price (NDPMP ).

NDPMP  is defined as the net market value of all the final goods and services produced within the domestic territory of a country by its normal residents and non-residents during an accounting year.

NDPMP =GDPMP – Depreciation

4. Net Domestic Product at Factor Cost (NDPFC ).

NDPFC refers to a total factor income earned by the factor of production within the domestic territory of a country during an accounting year.

NDPFC = GDPMP – Depreciation – Net Indirect Taxes NDPFC is also known as Domestic Income or Domestic factor income.

5. Gross National Product at Market Price (GNPMP).

GNPMP refers to market value of all the final goods and services produced by the normal residents of a country during an accounting year.

GNPMP = GDPMP + Net factor income from abroad It must be noted that GNPMP can be less than GDPMP when NFIA is negative. However, GNPMP will be more than GDPMP  when NFIA is positive.

6. Gross National Product at Factor Cost (GDPFC ) or Gross National Income

 GNPFC  refers to gross factor value of all the final goods and services produced by the normal residents of a country during an accounting year.

GDPFC  = GNPMP  – Net Indirect Taxes

7. Net National Product at Market Price (NNPMP ).

NNPMP  refers to net market value of all the final goods and services produced by the normal residents of a country during an accounting year.

NNPMP = GNPMP – Depreciation

8. Net National Product at Factor Cost (NNPFC ) or National Income.

NNPFC  refers to net money value of all the final goods and services produced by the normal residents of a country during an accounting year.

NNPFC = GNPMP   – Depreciation – Net Indirect Taxes It must be noted that NNPFC  is also known as National Income.

RELATIONSHIP BETWEEN ALL AGGREGATES: