National Income: Its Concept and Types

Ahmed Majed Badawi Hamza
Supervisor: Prof. Dr. Abd Ali Kazem Al-Fatlawi

• The word income in the Arabic language is the source of the verb “to enter,” and it means the revenue obtained from work or money, and it is the opposite of “to exit.” National income is defined (in English: National Income) as the total amount of income earned annually in a country from the production of goods, services, and investments within the country or from external sources, such as foreign investments and economic development aid, and it can be considered an indicator of wealth for most countries. (Mahmoud, 2021: 55)
• It is traditionally defined as the annual production of a country resulting from the employment of labor and capital in the country’s natural resources, which leads to the production of goods and non-material materials in addition to various services and is also called the country’s real net annual income or national profits. (Cheng Marguerite, 2021: 28)
• The modern definition of national income includes gross domestic and national products. The gross domestic product expresses the total annual value of all goods produced and services provided within the country and is calculated at the prevailing market price. Gross national product is calculated by collecting and evaluating data from all productive activities; such as agricultural products, timber, minerals, goods, insurance companies, and some professions such as lawyers and doctors, and productive services. It also includes the country’s net income from foreign investments and businesses. (Azzawi, 2020:)
Types of National Income
• (Gross National Income) GNI (versus Gross Domestic Product) GDP
• (Gross National Income) GNI (versus Gross National Product) GNP
• (Gross National Income) Atlas Method (Nominal)
• (Gross National Income) Atlas Method (Purchasing Power Parity) (Al-Hawri, 2005)
National Income Accounts:
National income accounts are defined as the basic aggregate statistics used in analyzing the country’s macroeconomics by doing the following:
• Providing population data and determining the level of individual well-being by determining individual income and its increase over time.
• Providing financial data and guidelines on inflation policy.
• Evaluating government and economic policies.
• Evaluating the level of productivity and its growth rate by studying it with labor force data, excluding home production and illegal production. (Alwan, 2020: 209)
• Developing countries’ economic policy, especially in the cases of emerging economies that are going through a transitional phase.