 Dear learner, this is the second part of Unit 1, Natural Income and Related Totals, relating to your course, Microeconomics 1 of your MA First Semester. In fact, this is second and concluding video of Unit 1. In this video, we shall discuss a few related totals and techniques economists use to measure the progress of the economy. We shall begin with the concept of gross domestic product. Gross domestic product or GDP is the total value of all the final goods and services produced within the domestic territory of a country during a period of time, usually a year. It is one of the fundamental indicators used to determine the health of a country's economy. Usually GDP is used as a comparison to the previous year. For instance, if the year-to-year GDP growth is up to 4%, this suggests that the economy has grown by 4% over the last year. Basically, GDP represents economic production and growth, and this has a large impact on nearly everyone within that economy. An important sense in GDP, whether up or down, often has significant implications on the stock market. This suggests why it is not so hard to understand why a bad economy usually means lower profits for companies whose intern means lower stock prices and negative GDP growth. Net domestic product is a measure of the economic output of a country that accounts for depreciation. It is calculated by subtracting depreciation from GDP. In general, NDP accounts for capital that has been consumed over the year in the form of housing, vehicle, or machinery deterioration. The depreciation accounted for is what economists refer to as capital consumption allowance. Thus, capital consumption allowance represents the amount needed in order to replace depreciated assets. Now, GNP, Gloucestershire product, GNP is the value of all finished goods and services produced in a country during a period of time by our nationals. Both GDP and GNP try to measure the value of all goods and services produced for the final sale in a particular economy. However, the difference revolves around how each term interprets what constitutes the economy. While GDP measures the domestic levels of production, GNP measures the levels of production of any person or corporation of a country. Depending on circumstances of each country, GNP can be either higher or lower than GDP. This depends on the net factor income from abroad. The GNP comprises income earned by nationals and companies abroad, but does not include income generated by foreigners within the country. The figures used to assess GNP include the manufacturing of tangible products, that is cars, furniture, and agricultural products, etc. GNP does not consider the services used to produce manufactured products because their value is already included in the price of the finished products. However, depreciation in indirect assets such as sales tax are included in GNP. Mathematically, GNP is private consumption plus government expenditures plus private investments plus exports minus imports plus inflow of factor income from abroad minus outflow of factor income from abroad. This gives us GNP. Now, net national product at factor cost and at market price, net national product is the net value of all goods and services produced by a country's nationals, whether overseas or resident, in the period being measured minus the amount of GNP required to purchase new goods to maintain existing depreciation, that is, GNP is equal to GNP minus depreciation. It should be noted that GNP is expressed in the currency of the nation it represents. In India, the GNP would be expressed as an Indian rupee whereas it would be expressed in Euro for EU member nations such as the Netherlands. By definition of implication, GNP measures net output available for consumption and investment by consumers, producers and government. That suggests that GNP is the same as the national income at factor cost. Products are sold at market prices which include the indirect taxes imposed by the government. For example, indirect taxes are levied on commodity such as GST, on packaged food and cloth and so on. As a result, the market value of the national product exceeds the income paid to the factors of production by the amount of indirect taxes. At the same time, some products are subsidized which are sold below their production cost. Accordingly, the market price of these products is less than their factor cost. Because of these differences arise between GNP at market price and GNP at factor cost. We may express GNP at market price as follows. GNP at market price is equal to GNP at factor cost minus indirect tax plus subsidies. In India and majority of the countries, it is the GNP at market price that is taken as the national income of the country. Now, personal income. Personal income can be simply defined as the individual's total earnings from salaries, wages and bonuses received from employment or self-employment during a given period. Personal income determines the consumer consumption since it serves as the indicator of user demand for both goods and services in the market. Now, disposable personal income. Disposable personal income is the total amount of money available for an individual to spend or save after taxes have been paid. Thus, disposable personal income is defined from personal income in that the former tax takes into account. This should be noted that only income taxes are deducted from the personal income figure while calculating disposable personal income. Now, relationship among the different concepts related totals of national income will be discussed in the next slide. So, here we can see the relationship among the different concepts of related totals. So for domestic income, it is actually rent plus wages plus interest plus mixed income plus profit tax plus dividend plus undistributed profit plus surplus of government sector, okay, when so separately or private sector. Or domestic income can also be derived from compensation of employees plus operating surplus plus missing income, okay, and national income. National income is derived from domestic income plus net fixed income from abroad. Private income. National income minus surplus of government sector plus all types of transfer incomes including national debt interest. Now, private income. Private income is equal to national income minus surplus of government sector plus all types of transfer incomes including national debt interest. Or private income is equal to income from domestic product according to private sector plus natural income from abroad plus all types of transfer income including national debt interest and personal income is equal to national income minus surplus of government sector minus corporate tax minus undistributed profit plus all types of transfer income including national debt interest or personal income can also be shown as private income minus corporate tax. Personal disposable income it is shown as personal income minus personal taxes including miscellaneous receipt of government or personal disposal income can also be derived from national income minus surplus of government sector minus corporate tax minus undistributed profit plus all types of transfer income minus personal taxes. So we conclude discussion of unit one here however for your conceptual clarity we shall request you to complete the following assignments okay. So some short questions are there answer these short questions within 100 words the first short question is make a comparative analysis between domestic income and national income. The second one is write a short note on national national product and factor cost and market price. Now a set of questions include which you need to answer within 400 to 500 words first is critically discuss the following terms GDP and NDP and write an essay on personal income and disposable personal income using yourself as an example. In the next video we shall take up unit two for discussion which is basically on national income and real estate accounts thank you.