National Income And Related Aggregates

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National income (Y) is the sum total of factor incomes earned by normal residents of a country during one accounting year. It is equal to net national product at factor cost.

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National income is defined through three equivalent approaches: output approach, income approach, and expenditure approach. Output approach measures final goods and services produced, income approach …

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Only final goods are counted because the value of intermediate goods is already embedded in the value of final goods. If intermediate goods were counted separately, their value would be counted twice.

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Intermediate goods are goods used as raw material for producing other goods or for resale in the same year. Examples include sugarcane purchased by a sugar mill, sugar held by a wholesaler for resale,…

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Final goods are goods meant for final consumption or final investment, not for resale. They include consumer goods and capital goods. Examples include milk purchased by households, a machine purchased…

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Consumer goods are used for final consumption, while capital goods are durable final goods used to produce other goods over several years. Capital goods are a form of producer goods. A residential bui…

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National income at current prices is called nominal national income. It can rise because of higher prices even when output does not rise.

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Real national income is national income measured at constant prices, using base-year prices for current-year output. It shows real changes in output and not price changes.