Answer the following questions:
2) What are the features of national income?
Answer:
National income is the sum of the values of all the final goods and services produced during an accounting period by the normal residents of a country. It can be calculated by three different methods, namely:
a) Output method
b) Income method
c) Expenditure method
Some of the important features of national income are as follows: -
i. Macroeconomic concept: Macroeconomics studies how an economy operates as a whole and focuses on the aggregate measures. Since national income is an aggregate term, it can be regarded as a macroeconomic concept.
ii. Flow concept: National income is measured over (during) a period of time. In other words, it can be said that the national income has an element of time attached to it. Thus, it is a flow concept.
iii. Money valuation of goods: Since national income is the total market value of all final goods and services in terms of money produced within the domestic territory during an accounting year, it can be concluded that national income is the money valuation of goods.
iv. Includes the value of final goods and services: National income includes only the value of final goods. The value of intermediate goods is not included in the estimation of national income. This is to avoid the problem of double counting.
v. Net aggregate value: National income is the net aggregate value. In the sense, it includes goods and services produced by firms during an accounting year. It does not include depreciation or consumption of fixed capital.
vi. Inclusion of Net Factor Income from Abroad (NFIA): National income includes the net factor income from abroad. That is, it includes the net export value and net receipts.
