What is National Income?
- National income is the value of goods and services produced by an economy over a period of time.
- NIS (national income statistics) are gathered for analysis of economic growth, data used to develop policies and models.
- Additionally it makes comparisons between countries straightforward.
- The UN's system of national accounts provides guidelines on how to gather statistics.
- Generally final goods should be counted.
- The most often used NIS is gross domestic product of GDP.
GDP
- GDP is the value of all final goods and services produced within a period of time (usually a year).
- The final good is the fully prepared final good, excluding components. For example a cup of coffee only takes into account the cup of coffee, but not the water, coffee beans and additives added into the drink as they would inflate statistics.
- GDP doesn't necessarily represent standard of living due to factors such as economic inequality and due to how money is spent.
- GDP doesn't show what is produced, machines and materials or drugs and weapons?
- The GDP doesn't show household or charity work.
- This is because they take into account factors such as education, healthcare, social support, etc.
Example
- Some people might have more money than others or the quality of life might be poor even if the government has a lot of money due to reasons such as corruption.
- Models such as HDI (Human development index), GPI (Genuine progress indicator) are more accurate when it comes to measuring standard of living.
GDP Per Capita
- GDP per capita is the GDP divided by the amount of people in a country. It can roughly show the average income of a person in a country.
Gini Coefficient
- The Gini-coefficient is used to measure wealth and income inequality in different countries.
- A Gini-coefficient of 0 represents perfect equality, where everyone in the country has equal money.
- A Gini-coefficient of 1 means perfect inequality, where one person has all the money in the country.
Human Development Index
- HDI, or human development index aims to the welfare of countries. The four factors of HDI are the average years of schooling, the expected years of schooling, average expected lifespan at birth and