National Income — Economics STD 12 Commerce / Arts — Question

(1) Flow Concept : National Income is the flow of goods and services produced in the economy during a year. The flow of goods takes place when there is production activity in the economy. It generates flow of income in the form of rent, wages, interest and profit.

(2) Avoid Double Counting: While estimating National Income we include only the value of final goods and services and not the value of intermediate goods or raw materials to avoid double counting.

(3) National Income is the net aggregate value : National Income includes net value of goods and services produced. It does not include depreciation cost. Depreciation is wear and tear of capital goods due to their continuous use in production.

(4) Transfer Income : Transfer Income in J the form of old age pension, lottery prize, scholarship, etc. are not to be included as they are received without contributing anything to the current national income.

(5) National Income is money valuation of goods: National Income is always expressed ( in money terms. Only those goods and services which are exchanged for money are included. Unpaid services like the service of housewife should not be included.

(6) National Income is calculated for one year : National Income is always expressed with reference to time period i.e. generally one financial year from 1st April to 31st March of every year.

(7) Net Income from Abroad: While estimating National Income net Income from abroad i.e. difference between exports and imports (X – M) as well as net income from foreign investment should be included (R – P).

(8) Macro Economic Concepts : National Income is a macro economic concepts as it is the aggregate income of the country. It includes the value of goods and services produced in the different sectors of the economy. National Income data present the (1) There are many theoretical difficulties picture of the performance of the economy in the measurement of National Income, during a given period of time.

(9) National Income is calculated at current and constant price: National Income when calculated at the prevailing market price it is called National Income at current price and when it is calculated at the base year price, it is called National Income at constant price