How is National Income derived? What is the GDP? What information does
it give us about a nation? What is per capita income? If you wanted to
know about the economy of a country, which would you consider more
important, and why? (25 points)
National Income is derived through the overall income earned by a
country’s people, including labor and capital investment.
Gross domestic product is the sum of gross value added by all resident
producers in the economy plus any product taxes and minus any
subsidies not included in the value of the products.
It measures output generated through production by labor and property
which is physically located within the confines of a country.
The following excerpts are definitions of National Income and GNPas
listed on this website
“National income is the sum of all factor earnings from production of
current goods and services. Factor earnings are incomes of factors of
production: land (rent), labor (salaries & wages), and capital
(interest and investment income)…”
“Gross domestic product (GDP) is the sum of all currently produced
final goods and services sold at market prices. “At market prices” is
the way GDP can measure, in a single number, the production of apples
plus oranges plus railroad cars plus all of the millions of other
goods and services produced in a major economy. Theoretically,
however, goods not sold in markets should be also be included in GDP,
e.g., services of homemakers or output of home gardens, as well as
illegal activities such as the sale of narcotics, gambling, and
prostitution. Also, because it is a measure of the value of output in
terms of market...