Gross National Product

• All output produced by the country’s OR

nation’s economic resources regardless of
where they are domiciles

Gross Domestic Product

• All output produced within the boundaries
of the nation's economy
• Nominal GDP is the market value of
all final goods and services measured in
current year prices

• Real GDP is the market value of all

final goods and services measured with the
price of a reference or base year.
GDP by Expenditure Method
• Personal consumption expenditure
• Gross private domestic investment
• Government expenditure
• Net Exports / imports
GDP income method
• Compensation of employees (i)
• Rents (ii)
• Interest (iii)
• Profit (iv)
– Proprietors’ income
– Corporate
• NATIONAL INCOME (I = i+ii+iii+iv)
• ADD: Indirect Taxes (a)
• Net National Product (NNP) = I + (a)
• Capital Consumption allowance (b)
• Gross National Product (GNP) = NNP + (b)
• + Payments of factor income to rest of the world (c)
• - Receipts of factor income from the rest of the world (d)
• GDP = GNP + (c) – (d)
Net National Product
• Net National product equals GNP less
replacement investment

National Income
• The total costs associated with producing net
national product include payments to the factors
of production (national income) and taxes
imposed by government at production or final
sale.
Calculation of National Income, Personal
Income, Personal Disposal Income and
Personal Savings
• Compensation of employees Rs.1866.3
• Business interest payments Rs.264.9
• Rental income of persons Rs.34.1
• Corporate Profits Rs.164.8
• Proprietors’ income Rs.120.3
• Corporate dividends Rs.66.4
• Social Security contributions Rs.253.0
• Personal Taxes Rs.402.1
• Interest paid by consumers Rs.64.4
• Interest paid by government Rs.105.1
• Government and business transfer Rs.374.5
• Personal consumption expenditures Rs.1991.9
National Income =
compensation of employees +
business interest payments + rental
income of persons + corporate
profits + proprietors’ income

NI = 1866.3 + 264.9 + 34.1 +

164.8 + 120.3 = 2450.4
Personal Income
• National Income – Corporate
Profits – Social Security
Contributions + Government and
Business Transfers + Interest Paid
by Government + Corporate Profits
• National Income 2450.4
Minus
Corporate Profits 164.8
Social Security Contributions 253.0 (417.8)
Plus
Govt. and Business Transfer 374.5
Interest paid by government 105.1
Corporate Dividends 66.4 546.0

Personal Income Rs. 2578.6

 Personal Disposal Income
• Personal Disposal Income = Personal
income – Personal Tax

Rs.2578.6 – 402.1 = 2176.5

Personal Saving = Personal
Disposable income – (Personal
consumption expenditure + interest
paid by consumers)

2176.5 – (1991.9 + 64.4) = Rs.120.2

GDP deflator
• The GDP deflator is an index of price
changes for goods and services purchased
by consumers, businesses, and government.
Budget Deficit
• Such a situation arises when the expenses
exceed the revenues. Here the entire
budgetary exercise falls short of allocating
enough funds to a certain area
• Current Account Deficit: this deficit shows
the different between the nation's exports
and imports
• Fiscal Deficit: It is the different between
the revenue receipts and total expenditure
• Primary Deficit: Fiscal Deficit minus
interest payments
• Revenue Deficit: it is the different between
revenue expenditure and revenue receipts.