What is national income?
National income is the sum of the monetary value of goods and services produced by a country's labor force in a given period (usually a year) with the help of natural resources and capital. While capturing these products and services, the problem of multiple counting of the same product occurs. That is why the sum of the value of all the last level goods and services (Final Product) produced in a country in a year is called national product. Or to say, National Product is the sum of the net value added by all production sectors in a country in a year. National income is generated from national production. Total national income is obtained by adding the total wages received by all workers in the country participating in national production, the total interest received by all capital owners in the country, the total rent received by all landowners in the country and the total profits received by all entrepreneurs in the country. That is, National Income – Total Wages + Total Interest + Total Rent + Total Profit. Capital goods incur some losses in production. Net national product or national income is obtained by deducting from the gross national product or income the cost of loss of capital [called depreciation expense] and the cost of raw materials used in past production.