National Income

Abstract

National income is one of the leading economic indicators of the state of an economy and of its resources. It can be defined as ‘a measure of the goods and services becoming available to a nation for consumption or adding to wealth’. Thus, a discussion of national income can serve as a useful introduction to a study of the public sector within an economic framework and to public finance in theory and in practice. But national income as an introductory chapter makes demands of a reader. The calculation of national income is a complicated exercise and a brief explanation of how it is done is not easy to follow. It could take several chapters or even a book, to do justice to theories relating to consumption, saving and investment that have a bearing on national income, but here they have to be summarised in a few pages to provide a background to the main themes. Nevertheless, national income has been included in this book because an understanding of the subject is essential in assessing governments' fiscal and monetary policies.