national income

(noun)

The total amount of goods and services produced within some "boundary. " The boundary is usually defined by geography or citizenship, and may also restrict the goods and services that are counted.

Examples of national income in the following topics:

  • National Income

    • A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region.
    • A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region, including gross domestic product (GDP), gross national product (GNP), net national income (NNI), and adjusted national income (NNI* adjusted for natural resource depletion).
    • Although some attempts were made to estimate national incomes as long ago as the 17th century, the systematic keeping of national accounts, of which these figures are a part, only began in the 1930s, in the United States and some European countries.
    • The value that the measures of national income and output assign to a good or service is its market value – the price when bought or sold.
    • The income approach equates the total output of a nation to the total factor income received by residents or citizens of the nation:

  • The Multiplier Effect

    • When the fiscal multiplier exceeds one, the resulting impact on the national income is called the multiplier effect.
    • In economics, the fiscal multiplier is the ratio of change in the national income in relation to the change in government spending that causes it (not to be confused with the monetary multiplier).
    • National income can change as a direct result in a change in spending whether it is private investment spending, consumer spending, government spending, or foreign export spending.
    • When the fiscal multiplier exceeds one, the resulting impact on the national income is called the multiplier effect.
    • As a result, the overall national income is greater than the initial incremental amount of spending.

  • Macroeconomics

    • For most macroeconomists, the purpose of this discipline is to maximize national income and provide national economic growth.
    • Equitable distribution of income and wealth among the economy's participants.
    • This does not, however, mean that income and wealth are the same for everyone.
    • To achieve these goals, macroeconomists develop models that explain the relationship between factors such as national income, output, consumption, unemployment, inflation, savings, investment and international trade.
    • the causes and consequences of short-run fluctuations in national income, otherwise known as the business cycle, and

  • Learning from GDP

    • GDP is a measure of national income and output that can be used as a comparison tool.
    • There are two commonly used measures of national income and output in economics, these include gross domestic product (GDP) and gross national product (GNP).
    • Over time GDP has become the standard metric used in national income reporting and most national income reporting and country comparisons are conducted using GDP.
    • The income approach equates the total output of a nation to the total factor income received by residents or citizens of the nation.
    • The main types of factor income are:

  • How Fiscal Policy Can Impact GDP

    • The fiscal multiplier (which is not to be confused with the monetary multiplier) is the ratio of a change in national income to the change in government spending that causes it.
    • When this multiplier exceeds one, the enhanced effect on national income is called the multiplier effect.
    • The multiplier effect arises when an initial incremental amount of government spending leads to increased income and consumption, increasing income further, and hence further increasing consumption, and so on, resulting in an overall increase in national income that is greater than the initial incremental amount of spending.
    • If the builder receives $1 million and pays out $800,000 to sub contractors, he has a net income of $200,000 and a corresponding increase in disposable income (the amount remaining after taxes).
    • The builders will have more disposable income, increasing their consumption and the aggregate demand.

  • Personal Income

    • The two statistics spring from different traditions of measurement: personal income from national economic accounts and money income from household surveys.
    • BEA publishes disposable personal income, which measures the income available to households after paying federal and state and local government income taxes.
    • BEA's monthly personal income estimates are one of several key macroeconomic indicators that the National Bureau of Economic Research considers when dating the business cycle.
    • BEA produces monthly estimates of personal income for the nation, quarterly estimates of state personal income, and annual estimates of local-area personal income .
    • The Census Bureau also produces alternative estimates of income and poverty based on broadened definitions of income that include many of these income components that are not included in money income.

  • The Circular Flow Model

    • The basic circular flow model consists of two sectors that determine income, expenditure, and output.
    • This equation means that the expenditure of buyers (households) becomes income for sellers (firms).
    • The firms spend the income on factors of production, which "transfers" the income to the factor owners.
    • The factor owners spend the income on goods which leads to the circular flow of payments .
    • The circular flow of payments is important within an economy because it 1) measures the national income, 2) provides knowledge of interdependence, 3) illustrates the unending nature of economic activities, and 4) shows injections and leakages.

  • Disposable Income

    • Disposable income is thus total personal income minus personal current taxes .
    • In national accounts definitions:
    • Discretionary income is disposable income minus all payments that are necessary to meet current bills.
    • Discretionary income = Gross income - taxes - all compelled payments (bills)
    • Disposable income is often incorrectly used to denote discretionary income.

  • Other Approaches to Calculating GDP

    • The income approach evaluates GDP from the perspective of the final income to economic participants.
    • Gross domestic product provides a measure of the productivity of an economy specific to the national borders of a country .
    • "National Income and Expenditure Accounts" divide incomes into five categories:
    • The sum of COE, GOS, and GMI is called total factor income; it is the income of all of the factors of production in society.
    • In practice, however, measurement errors will make the two figures slightly off when reported by national statistical agencies.

  • Defining GDP

    • Gross domestic product is the market value of all final goods and services produced within the national borders of a country for a given period of time.
    • GDP captures the amount a country produces, including goods and services produced for other nations' consumption, therefore exports are added.
    • The income approach looks at the final income in the country, these include the following categories taken from the U.S.
    • "National Income and Expenditure Accounts": wages, salaries, and supplementary labor income; corporate profits interest and miscellaneous investment income; farmers' income; and income from non-farm unincorporated businesses.
    • The income approach, alternatively, would focus on the income made by households as one of its components to derive GDP.