Study Notes
National income represents the total output of a country, which is equivalent to the total income and expenditure. It is measured using various methods and adjusted for market and basic prices, as well as gross and net values.
- National Income — the total output of a country, representing the total income and expenditure. Example: The income earned by producing and spending the country's output.
- Gross Domestic Product (GDP) — the total value of goods and services produced within a country's borders. Example: Pakistan's GDP measures the total value of output produced by factors of production based in Pakistan within a year.
- Gross National Income (GNI) — GDP plus net income from abroad. Example: GNI includes income from investments and workers abroad.
- Net National Income (NNI) — GNI minus depreciation. Example: NNI reflects the net income earned by residents and businesses after accounting for depreciation.
- Market Prices — prices paid by consumers including taxes. Example: Market Price = Basic Price + Indirect Taxes - Subsidies.
- Basic Prices — income received by producers before taxes. Example: Basic Price = Market Price - Indirect Taxes + Subsidies.
Exam Tips
Key Definitions to Remember
- National Income
- Gross Domestic Product (GDP)
- Gross National Income (GNI)
- Net National Income (NNI)
Common Confusions
- Difference between GDP and GNI
- Market prices vs. basic prices
Typical Exam Questions
- What cannot be measured to find a country’s GDP? Wealth
- What is included in net property income from abroad? Interest
- What must be zero if GDP at market prices is equal to GNI at market prices? Net property income
What Examiners Usually Test
- Understanding of GDP, GNI, and NNI differences
- Methods of measuring GDP
- Adjustments from gross to net values