GDP ≡ Sum total of gross value added of all the firms in the economy
GNP ≡ GDP + Net factor income from abroad
Net factor income from abroad= Factor income earned by the domestic factors of production employed in the rest of the world – Factor income earned by the factors of production of the rest of the world employed in the domestic economy
NNP (at market prices) ≡ GNP – Depreciation
| NNP at factor cost (National Income or per capita income) ≡ NNP at market prices – Net indirect taxes |
Net indirect taxes ≡ Indirect taxes – Subsidies
Personal Income (PI) ≡ NI – (Undistributed Profits + Corporate Tax) – Net interest payments made by households + Transfer payments to the households from the government and firms
NI, which is earned by the firms and government enterprises, a part of profit, is not distributed among the factors of production. This is called Undistributed Profits (UP).
Corporate Tax, which is imposed on the earnings made by the firms, will also have to be deducted from the NI, since it also does not accrue to the households.
Personal Disposable Income (PDI ) ≡ PI – Personal tax payments – Non-tax payments.