(a) Define gross national income. (2 marks)
(b) Using appropriate examples, distinguish between:
(i) Personal income and disposable income. (6 marks)
(ii) Nominal income and real income. (6 marks)
(c) Outline any three uses of national income statistics. (6 marks)
Explanation
(a) Gross national income is the money value of all final goods and services produced in an economy in a given period plus net income from abroad.
(b)(i) Personal income is the amount earned by an individual for taking part in the production of goods and services either by him or his property e.g. wages, interest, rent and profit. Disposable income on the other hand is what individuals have to spend after personal income tax has been deducted from their personal income i.e. disposable income equals personal income less personal income tax.
(ii) Nominal income is the value of all goods and services produced expressed in terms of current money income received from their production. Real income on the other hand is nominal income expressed in terms of what it can buy. It is the nominal income deflated by the price level.
(c)(i) It is used for economic planning.
(ii) It is used as a basis for aids and grants from other countries.
(iii) It is useful in the calculation of per capita income.
(iv) It is used for international comparison of standard of living.
(v) It allows for sectoral comparison.
(vi) It allows for inter temporal comparison.
(vii) It influences foreign investments.
(viii) It is used as a basis for contribution to international organizations.
(ix) It is used to measure the level of economic performance i.e. whether the economy is growing or not.