Test: National Income - JAMB MCQ

Gross Domestic Product (GDP) measures the total market value of all final goods and services produced within a country's borders in a specific period, usually a year. It includes goods and services produced by both domestic and foreign factors of production.

 Net National Product (NNP) is calculated by subtracting depreciation (or the value of worn-out capital) from Gross Domestic Product (GDP). NNP provides a measure of the net output produced by a country after accounting for capital consumption.

Gross National Product (GNP) is the total market value of all final goods and services produced by a country's residents, regardless of their location, in a specific period. GNP includes net income from abroad, which is the difference between income earned by domestic residents from foreign investments and income earned by foreign residents from domestic investments.

National Income (NI) measures the total income earned by individuals and businesses within a country's borders in a specific period. It includes wages, salaries, rents, profits, and other forms of income earned from production activities.

The output method of measuring national income involves summing up the value of all final goods and services produced. One of the main challenges in this method is accurately valuing intermediate goods, which are used as inputs in the production process. Determining the appropriate value for intermediate goods can be complex and may lead to inaccuracies in national income estimates.

National income estimates have several limitations, including the exclusion of non-market activities, ignoring income distribution, and excluding transfer payments. However, national income estimates do not directly address the issue of environmental degradation. Environmental concerns are typically addressed through separate indicators and measures.

The two-sector model of the circular flow of income simplifies the economy by considering only households and firms. It represents the flow of income between these two sectors, where households supply factors of production (such as labor) to firms and, in return, receive income in the form of wages, salaries, rent, and profit.

 In the circular flow of income, households receive income from firms in various forms, including wages (for labor services provided), salaries (for employment in the non-business sector), rent (for the use of property), and profit (for ownership of businesses).

The three-sector model of the circular flow of income adds the government sector to the households and firms. This model accounts for the flow of income between households, firms, and the government, representing the government's role in collecting taxes, providing public goods and services, and redistributing income.

Aggregate demand represents the total spending on goods and services in an economy. It consists of four components: consumption (spending by households), investment (spending by businesses on capital goods), government spending, and net exports (exports minus imports).