Definition: National Income is an economic metric that measures the total amount of earnings produced within a given country. In other words, it is the aggregate income produced by each economic unit that operates the country.
What does National Income Mean?
National income is a macroeconomic variable that helps economists to understand the earning power of a country. The concept focuses mostly on income generated inside the country boarders. This means that all the income produced by individuals, with no regard of their citizenship or, in the case of businesses, the place of incorporation, is measured to assess the country’s earning potential.
The term national income is sometimes used to describe different metrics or concepts, the most common ones being Gross National Product (GNP) and Gross National Income (Gross National Income).
The difference with these two is that the GNP measures the total productive output of the economy, while the National Income only measures earnings; on the other hand, GNI measures all income generated by the country citizens both inside the country and overseas. National Income includes business earnings, salaries, rent, commissions, interest, and dividends, among other income items.
Here’s an example of the concept.
Example
The Central Bank of a country called CBA just released last year’s economic statistics. Within these reports there is one that measures the different income categories and how much was earned by each class. The figures were the following: Wages $1,589,645,758, Earnings from Corporations $42,932,441,643, Interest and rents $2,832,561,175, Interest Earned from Overseas Sources $1,218,842,935, Income and Earnings received from Overseas $365,754,719. What would be the National Income according to this report?
As we previously discussed, National Income is a metric that measures the total amount of earnings produced by a given country. In this case, we must exclude oversea items, since this income is not internally produced. By adding the figures (1,589,645,758 + 42,932,441,643 + 2,832,561,175) the National Income would be a total of $47,354,648,576.
