National Income Helpsheet and Formulas
Uploaded by
Sarthak BoseNational Income Helpsheet and Formulas
Uploaded by
Sarthak BoseHelp Sheet for National
Income Accounting
By Sarthak Bose (6290380930)
Basic Concepts and Relations in
National Income Accounting
National income can be calculated the sum of total market value
of productions or sum of total incomes or sum of total
expenditures.
• GNPMP(as sum of value of outputs) = [Total monetary value of
final goods and services produced in a year] + NFIA
• GNPMP(as sum of incomes) = [Wages and salaries + Rent +
(Net Interest Income + Depreciation) + Corporate Profits +
Dividends + Profits of sole-ownership and partnership business
+ Net Indirect Taxes] + NFIA
• GNPMP(as sum of expenditures) = [C + I + G + (x – M)] + NFIA
In every equation, the term in the squared brackets [..] represents
GDPMP. In the second point, (Net Interest Income + Depreciation)
is also known as gross interest income.
GNPMP(as sum of value of outputs) = GNPMP(as sum of
incomes) = GNPMP(as sum of expenditures)
Components of Net National Product at
Factor Cost in its Three Phases
Value Added Method Income Method Expenditure Method
1. Gross Value added at market prices: 1. Compensation of Employees: 1. Final expenditure on domestic product:
i. Primary sector i. Wages and salaries in cash i. Private Final Consumption Expenditure (C)
ii. Secondary sector ii. Supplementary labour incomes ii. Final Domestic Expenditure on Investment (I)
iii. Tertiary sector iii. Compensation in kind (Gross Domestic Capital Formation + Change in
stock or inventory investment)
iii. Final Government Consumption Expenditure (G)
iv. Net Exports/ Net Foreign Investment (X – M)
2. Depreciation 2. Operating Surplus: 2. Depreciation
i. Rent
ii. Net Interest
iii. Royalties
iv. Dividends
v. Undistributed Profits
vi. Corporation Taxes
vii. Profit of Govt. Companies
3. Net Indirect Taxes 3. Mixed Incomes/ Incomes 3. Net Indirect Taxes
4. NFIA 4. NFIA 4. NFIA
• GDPMP = 1 (i + ii + iii) • GDPMP = 1 + 2 + 3 + NIT + Depreciation • GDPMP = 1 (i + ii + iii + iv)
• GNPMP = 1 + 4 • NDPMP = 1 + 2 + 3 + Net Indirect Taxes (NIT) • GNPMP = 1 + 4
• NDPMP = 1 – 2 • GNPMP = 1 + 2 + 3 + NIT + Depreciation + NFIA • NDPMP = 1 – 2
• NNPMP = 1 – 2 + 4 • NDPFC = 1 + 2 + 3 • NNPMP = 1 – 2 + 4
• NNPFC = 1 – 2 – 3 + 4 • NNPFC = 1 + 2 + 3 + 4 • NNPFC = 1 – 2 – 3 + 4
Some Concepts regarding Income Method
National income can be calculated through income method in different ways:
• NNPFC = Total Rental Income + Total Wages and Salaries + Net Interest+ + Corporate Profits +
Dividends + Profits of sole-ownership and partnership business + Net Indirect Taxes + NFIA
• NNPFC = Compensation of employees + Operating surplus + Mixed Income + NFIA
Notice that, The interest in this formula is written as Net Investment Income. Net Interest Income means Net
Interest – Depreciation. Sometimes it is also written as:
Net Interest = Gross Interest – Consumption of Fixed Capital
Sometimes, it is also referred to as Net Investment Income.
GDP as Sum of Expenditures
GDPMP as sum of expenditures
Gross Domestic Expenditure
Private Final Consumption including govt. investment Final Government Expenditure for
Net Exports (X – M)
Expenditure (C) expenditure or public Govt. Consumption (G)
investment (I)
Gross Fixed Business Investment Inventory Investment Residential Investment
Some More Relationships
• Private Income = NI or NNPFC – Income accruing to
government – Surplus of government undertakings + Interest
on National Debt + Net Current Transfers from govt. + Net
Current Transfers from Rest of the World
• Personal Income = National Income – Undistributed Profits –
Corporation taxes – Social Security Contributions + Transfer
Payments + Interest payments on public debt
• Personal Disposable Income (PDI) = Personal Income – Direct
Tax