National Income

Publisher Summary This chapter discusses the leading economic indicators of the state of an economy and of its resources—national income. The national income of a country is the aggregate of the income of its citizens. This total equals total expenditure and each in turn equals total output— after adjustments for foreign transactions and government transfer payments and taxation. There are three ways of calculating national income: income method, expenditure method, and output method. National income can be expressed at current market prices and constant prices to avoid distortions because of changes in the value of money. Per capita national income is the total national income divided by the number of people in a country. This gives national income per head of the population. Governments use national income data for the purpose of managing of national economies and as a measuring rod for international commitments. International comparison of economic welfare (the standard of living) on the basis of national income is difficult and can lead to misleading conclusions without a thorough knowledge of the economies that are being compared.