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Factor cost or national income by type of income is a measure of national income or output based on the cost of factors of production, instead of market prices. This allows the effect of any subsidy or indirect tax to be removed from the final measure. [1] The concept of factor cost is focusing on the cost incurred on the factor of production.
A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region, including gross domestic product (GDP), Gross national income (GNI), net national income (NNI), and adjusted national income (NNI adjusted for natural resource depletion – also called as NNI at factor cost).
The sum of the gross value added in the various economic activities is known as "GDP at factor cost". GDP at factor cost plus indirect taxes less subsidies on products = "GDP at producer price". For measuring the output of domestic product, economic activities (i.e. industries) are classified into various sectors.
The gross national income (GNI), previously known as gross national product (GNP), is the total amount of factor incomes earned by the residents of a country. It is equal to gross domestic product (GDP), plus factor incomes received from non-resident by residents, minus factor income paid by residents to non-resident.
Although the net national product is a key identity in national accounting, its use in economics research is generally superseded by the use of the gross domestic or national product as a measure of national income, a preference which has been historically a contentious topic (see e.g. Boulding (1948) [3] and Burk (1948) [4]).
Net national income encompasses the income of households, businesses, and the government. Net national income is defined as gross domestic product plus net receipts of wages , salaries and property income from abroad, minus the depreciation of fixed capital assets (dwellings, buildings, machinery, transport equipment and physical infrastructure ...
Seven summary accounts are published, as well as a much larger number of more specific accounts. The first summary account shows the gross domestic product (GDP) and its major components. The table summarizes national income on the left (debit, revenue) side and national product on the right (credit, expense) side of a two-column accounting report.
Factor cost measured have being abandoned by the SNA. Factor income is used to analyze macroeconomic situations and to find out the difference between gross domestic product and gross national income : difference between the total value of the goods and services produced in a country and the income of the citizens of the country.