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CHAPTER 8: NATIONAL INCOME

DEFINITION/CONCEPT

NATIONAL INCOME: THE FLOW OF GOODS AND SERVICES BY A NATION OVER
A PERIOD OF TIME, USUALLY A YEAR
GROSS DOMESTIC PRODUCT: THE TOTAL MARKET VALUE OF ALL FINAL
GOODS AND SERVICES PRODUCED BY FACTORS OF PRODUCTION IN A
COUNTRY OVER A GIVEN PERIOD OF TIME

GROSS NATIONAL PRODUCT: TOTAL MARKET VALUE OF ALL FINALS GOODS
AND SERVICES PRODUCED BY THE RESIDENTS OF A COUNTRY DURING A
GIVEN PERIOD OF TIME

MARKET PRICE: REFERS TO THE CURRENT PRICE IN THE MARKET THROUGH
THE FORCES OF DEMAND AND SUPPLY
FACTOR COST: THESE ARE THE REAL PRICES EARNED BY PRODUCERS OR
SELLERS

NET NATIONAL PRODUCT: THE MARKET VALUEOF THE NET OUTPUT OF
GOODS AND SERVICES PRODUCED BY A NATION IN A YEAR

INDIVIDUAL INCOME: THE INCOME THAT IS ACTUALLY RECEIVED BY
INDIVIDUALS AND HOUSEHOLDS IN AN ECONOMY IN A YEAR
DISPOSABLE INCOME: PART OF THE PERSONAL INCOME THAT IS LEFT
AFTER THE PAYMENT OF PERSONAL DIRECT TAXES

EXPENDITURE APPROACH: OBTAINED BY ADDING ALL THE EXPENDITUREON
GOODS AND SERVICES IN A YEAR

INCOME APPROACH: MEASURES BY ADDING ALL THE VARIOUS TYPES OF
INCOME PAID TO THE FIRM AND HOUSEHOLDS

PRODUCT APPROACH: MEASURED BY NET VALUE OF ALL FINAL GOODS AND
SERVICES PRODUCED BY A NATION DURING A YEAR

NOMINAL INCOME: GROSS NATIONAL PRODUCT MEASURED IN CURRENT
PRICES (NOT ADJUSTED WITH INFLATION)

REAL INCOME: GNP MEASURED ON A FIXED PRICE OR IN A BASE YEAR
(ADJUSTED INFLATION)

HOUSEHOLDS: OWN ALL THE FACTORS OF PRODUCTION; LAND, LABOR,
CAPITAL AND ENTREPRENEUR

FIRMS: ORGANIZATION THAT BUYS THE FACTORS OF PRODUCTION FROM
HOUSEHOLDS AND PRODUCE GOODS AND SERVICES