Question

The National Income of a country is

• A. the annual revenue of the Government
• B. sum total of factor incomes
• C. surplus of PSU'S
• D. export minus Import

Hint:

Think about the income approach to measuring national output: wages plus rent plus interest plus profit.

Answer 1

The Correct Option is B

Concept:
National income is a macroeconomic measure of the total value of goods and services produced by the normal residents of a country during a year, and it is calculated as the sum total of factor incomes earned in the process of production, that is wages for labour, rent for land, interest for capital, and profit for entrepreneurship.

Explanation:
The Government's annual revenue, made up of taxes and other receipts, is only one small stream of money flow and does not capture the value of goods and services produced across the whole economy, so option A is wrong. The surplus generated by public sector undertakings is again just one narrow segment of the economy, not the entire national output, so option C is wrong. Export minus import gives the trade balance of a country, which is only one component used while calculating GDP from the expenditure side, not the definition of national income itself, so option D is wrong. National income, by definition, is obtained by adding up all factor incomes, that is wages, rent, interest and profit, earned by the residents of the country.

Final Answer:
National income is the sum total of factor incomes earned by the residents of a country during a year.