National income refers to the total value of all goods and services produced within a country’s borders in a given period of time, usually a year. It is an important economic indicator that reflects the economic performance of a country.
The components of national income are:
- Wages and salaries: This includes all the income earned by individuals for their work, including salaries, wages, and other benefits such as bonuses, overtime pay, and commissions.
- Rent: This includes income earned by owners of land, property, or other assets, who rent out their property to others.
- Interest: This includes income earned by individuals or businesses from lending money or investing in financial assets such as stocks, bonds, and mutual funds.
- Profits: This includes income earned by businesses from their operations, after deducting all expenses such as rent, wages, and interest.
- Indirect taxes: This includes taxes imposed on goods and services, such as sales tax, excise tax, and value-added tax (VAT).
- Depreciation: This is the reduction in the value of an asset over time due to wear and tear or obsolescence, and is included as a cost of production in calculating national income.
The sum of these components gives us the gross domestic product (GDP), which is the total value of all goods and services produced within a country’s borders in a given period of time.