Meaning of National Income

In this article, we explain the meaning and features of national income. You will know what national income actually is and what it measures.

The human resources of a nation combinedly working with capital and natural resources produce annually various quantities of goods and services. The monetary value of all those goods and services produced by combined efforts of productive resources/inputs/factors of production may be defined as or may be considered a measure of the national income of a country.

Therefore, the national income of a country can be defined as the sum of income earned by the citizens of a particular nation from their productive services in the world of production in a year.

Alternatively, national income includes payments made to all productive resources in the form of wages, interest, rent, profit, etc.

So, national income refers to the sum of income earned by all individuals of a nation in a particular period. The data or figure of the national income of a country exhibits the total economic performance of the economy of that country.

National income is an uncertain term that is used interchangeably with national dividend, national output, and national expenditure.

Since the national income is the sum of income earned by all individuals of a country in a year, the following equation can be used to make clear the measurement of national income.

            NI=Y₁+Y₂+……+Y_n

While knowing the concept of national income, two things must be noted. First, it measures the market value of annual output or it is the monetary measure.  Secondly, accurate calculation of national income, all goods, and services produced in any given year must be counted only once and not more than once.

Features of NI

The major features of national income are enlisted below.

• It is the sum of income earned by all individuals of a nation in a particular period.
• It shows the monetary value of all the newly produced goods and services by the virtue of the productive contribution of factors of production owned by the citizens of a nation.
• National income data shows the state, structure, performance, and economic health of an economy.
• National income represents total receipts (total income generated by owners of factors of production from their factor contribution in the production process), total expenditure (total spending made by different sectors of the economy in the purchase of consumer goods as well as capital goods), and total output (total quantity of goods and services that citizens of a country produced within a year).
• It measures the monetary value of annual output.
• For accurate measurement of national income, all goods, and services produced in any given year must be counted only once and not more than once. 

-It is the total amount of money income generated from all economic activities during a year.
-It is a flow concept because it shows the flow of final goods and resources produced from all economic sectors in a country during a year.
-There is a triple identity of national income, i.e., National Output (NO) = National Income (NI) = National Expenditure (NE).
-National income is always calculated in the net form i.e.; depreciation is always deducted from the gross value of national income.
-It is the combined contribution of all economic resources- natural resources, physical resources, and human resources.

Features of National Income