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National income is considered an uncertain term and it is utilized interchangeably with national output, national expenditure, and national dividend. And so, national income has got defined in many ways.

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What is Meant by the Idea of National Income?

National income is the total income that accrues to a nation from economic activity and it comprises payments that are made to every resource regarding interests, wages, profits, and rent. 

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National income is meant the value of services and goods created during a financial year by a nation. So, this is acknowledged as the net outcome of every economic activity of a nation during one year. This is habitually valued in money. When a country has progressed then it means it has got an impressive national income.

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Some Concepts of National Income

National income has got many concepts and some of them are GNP, GDP, NI, NNP, PCI, DI, and PI. They explain the truths of a country’s economic activities.

GDP at market price – This is the monetary value of all services and goods that are created within the domestic area and that too with the obtainable resources in a year.

GDP = (P*Q)

NNP (Net National Product) at MP – This is the market value of final services and goods’ net output that an economy produces during a year.

NNP = GNP-Depreciation.

Gross National Product or GNP – This is the market worth of final services and goods that get created in a year. The residents of a country produce it. GNP is also considered the worth of services and goods that the citizens of a country create irrespective of their location.

National Income or NI – This represents the total income that resources earn for their contribution of labor, land, organizational ability, and capital. So, the total of the income is received as wages, rent, profit, and interest.

NI= Subsidies + NNP-Interest Taxes

Personal Income – This is the total cash that individuals, as well as households of a nation, receive from every possible source before direct taxes. So, personal income gets expressed as:

PI = Corporate Income Taxes – NI - Undistributed Corporate Profits - Transfer Payments + Social Security Contribution.

DI or Disposal Income – This is the income that is left with people after they pay direct taxes from their personal income. This is the net income that is left for disposing of. People can consume this amount. DI is expressed as:

DI = Direct Taxes - PI

PCI or Per Capital Income – This gets calculated when you divide a country’s national income by a country’s total population. So, PCI is expressed as the following

PCI = Total National Population/Total National Income

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