Theory question 106
National Income(a) Define gross national income.
(b) Using appropriate examples, distinguish between: (i) Personal income and disposable income; (ii) Nominal income and real income.
(c) Outline any three uses of national income statistics.
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(a) Gross national income is the total money value of incomes earned by the citizens and firms of a country from productive activities at home and abroad in a year, before allowing for depreciation.
(b)(i) Personal income is the total income received by individuals from all sources (wages, rent, interest, transfers) before personal income tax; disposable income is personal income minus personal income tax, the amount available to spend or save. E.g. salary N100,000, tax N10,000: personal income N100,000, disposable income N90,000.
(ii) Nominal income is income in current money terms; real income is what that money can buy after allowing for price changes. E.g. income doubles but prices also double: nominal income rose, real income unchanged.
(c) Any three: measure economic growth and performance; compare standards of living over time and between countries; economic planning; reveal the structure of the economy (contribution of each sector); basis for international aid and contributions; guide investors.
Use simple numerical examples for the distinctions.