Economics AS · The Macroeconomy. The idea in plain words, the rules to remember, the mistake to avoid and a worked example, written and checked by Mega Lecture.
National income is the total value of the goods and services an economy produces in a period, usually a year. It can be measured by adding up output, incomes or spending, and the three methods give the same total.
GDP is the value of output produced inside the country, whoever owns the resources. GNI is the income earned by the country's residents, wherever it is earned. NNI allows for capital that has worn out during the year.
Two adjustments are tested often. Market prices include indirect taxes and subsidies, while basic prices show what producers actually receive. Gross values include depreciation, while net values leave it out.
When moving from market prices to basic prices, students add indirect taxes and subtract subsidies. It is the other way round: take taxes off and add subsidies back.
Answer: NNI at basic prices is $1,235 bn.
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