National Income 3

National Income 3

National income The income and the expenditure approaches measure the gross national product 'gross' because they include depreciation the amount of current income or output required to maintain intact the existing stock of capital. In the course of producing current output some capital is used up: machines wear out, stocks are run down, buildings fall into disrepair. If depreciation were not made good the ability to go on producing would be impaired, so some part of current income must be allotted to maintenance of the country's assets and is not part of current income available for consumption or for adding to wealth.

The net national income of the United Kingdom in the early 2000's was approximately £23,000 million.

Increases in the money value of individual incomes and the national income cannot always be interpreted to mean that an individual or nation is better off. The increase may be due merely to rising prices, in which case a higher money income will buy the same amount of goods and services as the earlier and lower money income. In order to discount the effects of rising prices and inflation it is customary to think in terms of real incomes (or in the volume of goods and services that can be bought by a given income). A convenient approximation of real incomes (or income at constant prices) may be obtained by dividing income by an appropriate index of prices. Thus the U.K. gross national product rose from around £14,000 million in 2002 to £25,000 million in 2002, an increase of over 70 per cent. But increases in prices reduced the growth in 'real' national income to less than 40 per cent.

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