Notes And Study Material for Exam Papers

Professor Marshall defines National Income as “Sum of all the physical goods produced and services provided by utilizing the natural resources of the country with the help of labour and capital. In addition to this net income from abroad is also included. Accordingly, National Income is the summation of all the goods produced and services provided and the net income from abroad.” Apparently Marshallian definition seems to be very simple and comprehensive, but it has some practical shortcomings. (1) Statistically it is difficult to estimate accurately about the produced goods and services. (2) There may be possibility of double and multiple counting. (3) Certain portion of produced goods is kept for personal consumption. Because of such shortcomings Pigou defined National Income as “Only those goods and services will be included in National Income which are gold against money.” But Pigou’s definition is not acceptable for those countries where there is limited use of m...

Inflation or deflation complicates GNP because GNP is a price times-quantity figure. The changes either in the price level or the change in output produced may affect the size of GNP. Then there rises a distinction between nominal GNP and real GNP. The nominal GNP is the representation of GNP in monetary terms while the real GNP is the representation of GNP in quantity or physical terms. Broadly, the nominal or current price GNP measures the value output at the prices prevailing in the period during which the output is produced. While the real GNP or constant price GNP measures the output produced in any period at the prices of some base year. Real GNP which values the output produced in different years at the same prices implies an estimate of the real or physical change in production or output between any specified years. If we assume 2000 as a base year, it will serve as the base year for real output measurement. US nominal GNP was $4864 billion in 1988 and it was $1598 billion ...

The Gross National Product (GNP) is the summation of all those finally produced goods and services which the labour and capital like factors of production have produced by utilizing all the resources of the country in a year. If we represent such all aggregate output in the form of money we get GNP. If we define GNP from market prices point of view then “GNP” is the market value of all goods and services produced in a country in a year.” The GNP is a flow variable, because it represents the amount of goods and services produced during some particular period of time i.e. a year. If we represent the produced goods and services by Q 1 , Q 2 , Q 3 , Q 4 ……..and their prices by P 1 , P 2 , P 3 , P 4 ………..then the GNP of a country will be as GNP = P 1 Q 1 + P 2 Q 2 + P 3 Q 3 + P 4 Q 4 ………..P n Q n But the measure of GNP by this method we have to make the following cares. 1.         To ensure GNP the value final goods will be inc...

Professor Marshall defines National Income as the “Sum of all the physical goods produced and services provided by utilizing the natural resources of the country with the help of labour and capital. In addition to this, the net income from abroad is also included. Accordingly, the National Income is the summation of all the goods produced and services provided and the income from abroad.” According to present ideas, National Income may be defined as the aggregate factor income i.e. earning of labour and property which arises from the current production of goods and services by the nation’s economy. Professor Keynes has used three methods or approaches to define National Income. 1.         The sum of all expenditures which are made on consumption and investment goods is known as National Income. Such definition of National Income on the one side, considers total output of the economy as National Income. While on the other side the total ...