Introduction to Adam Smith
Adam Smith is known as the father of modern economics. He was a resident of
Scotland and was a professor at the University of Glasgow. His published book
‘An Inquiry into the Nature and Causes of the Wealth of Nations’ Before Smith,
the physiocrats of France were great thinkers of political economics. Now let’s
talk about national income.
goods are those goods which have crossed the boundary line of production.
and is ready for use by its end users, final goods are divided into two
categories: consumption goods and capital goods.
Consumption goods are known as consumer goods
Consumer goods are those goods that directly satisfy human needs, they are
not use for the production of other goods.
Capital goods are those goods which are use for many years in the process of
production, they are fixed assets of the producer eg plant and machinery.
Durable consumer goods – these are goods that are use for many years
3) Washing Machine
Intermediate goods are those goods which have not yet crossed the threshold
Prices of these items are not yet fully determined, they are yet to be
increase in value. They are not yet ready for use by end-users.
For some it is the final commodity; for some it is the intermediate object.
Example- Milk is the intermediate commodity for the tea maker and for a
common man who wants to drink a glass of milk at night, milk is the last commodity.
stock and flow
Stock is a quantity measured at a certain point in time [as]
You can have ₹50,000 in your bank account as on 1st January 2020
meaning of flow
The quantity measured over a specific period of time is you probably spend
₹200 per day in the canteen
It includes both the expenditure incurred by the producers on the purchase
of new assets and the replacement of existing assets during an accounting year.
About the accounting year
Accounting year of Reserve Bank of India
The accounting year of the Reserve Bank of India is between July 1 and June
Whereas the financial year of the country is between 1 April to 30 March.
Aspects of national income
Gross National Product (GNP) – The goods manufactured by
the people of the nation which are manufactured in a given time period (time).
The net value derived from them is called Gross National Product (GNP).
Net National Product (NNP) – Net National Product is
generally viewed from the point of view of profit, that is, the value of
production is removed from the Gross National Product (GNP). After which the
net national product of the nation becomes known.
National Income of India
The national income of India is very necessary for the smooth operation of
power towards each nation. The calculation of the national income of India was
first started by Dadabhai Noroji in the year 1867-1868. At that time Noroji
told according to his assessment that the per capita income of India is 20
rupees, that is, if the population at that time is divided by 20, then we will
know the national income at that time.
Product method and income method are adopted to find the national income of
any nation, so let us know what is this method?
1. Income Method – Under this, the sum of the payments made
for the resources of production is taken and it is used to estimate the GDP of
the service provider like transport, governance and industry business.
2. Product Method – Under this, the net value addition of
goods and all services is calculated. It is used in the fields of agriculture,
animal husbandry and industry.
(Currently the national income of India is assessed by the Central
National income serves to show the structure and status of each nation
(country). It is the endeavor of all countries that they find a way to increase
their national income and they get success in them. Increase in national income
is essential for the development of the nation.
Real Flows and Money Flows or Intersectoral Flows: