Enter GDP at market prices (or its expenditure components C, I, G, X, and M), net factor income from abroad (NFIA), depreciation (consumption of fixed capital), and net indirect taxes (indirect taxes minus subsidies) to estimate the national income (NNP at factor cost) of a country.
National Income Formula
The following equation can be used to calculate national income (often measured as NNP at factor cost).
NI = C + I + G + (X - M) + NFIA - Dep - NIT
- Where NI is the national income (NNP at factor cost)
- C is total consumption
- I is total investment
- G is government expenditure on goods and services
- X is exports
- M is imports
- NFIA is net factor income from abroad (income earned by residents abroad minus income earned domestically by non-residents)
- Dep is depreciation (consumption of fixed capital)
- NIT is net indirect taxes (indirect taxes minus subsidies)
National Income Definition
National income is a monetary estimate of the total income earned by a country’s residents over a period (typically a year). In national accounting, it is commonly reported as net national product at factor cost (NNP at factor cost), which is related to—but not the same as—GDP because it adjusts for income flows with the rest of the world and typically subtracts depreciation and net indirect taxes.
National Income Example
How to calculate national income?
- First, determine GDP using the expenditure components.
Calculate GDP as C + I + G + (X − M).
- Next, determine net factor income from abroad (NFIA).
Find NFIA as income earned by residents abroad minus income earned domestically by non-residents.
- Next, determine depreciation and net indirect taxes.
Estimate depreciation (consumption of fixed capital) and net indirect taxes (indirect taxes minus subsidies).
- Finally, calculate national income.
Calculate NI = GDP + NFIA − Depreciation − Net Indirect Taxes.
FAQ
National income is the total income earned by a country’s residents over a period (usually a year), commonly measured as net national product (NNP) at factor cost (i.e., GDP adjusted for net factor income from abroad, depreciation, and net indirect taxes).
