As an important economic metric of a nation, it influences policy decisions, investment considerations, and socio-economic planning. It refers to the aggregate value of all the final goods and services produced in a country in a particular period of time usually one financial year.
These concepts are dealt with in the sections that follow. The circular flow of income is a model of the economy in which major exchanges are represented as flows of money, goods, services, etc. Production, consumption, and investment are important economic activities of an economy. In carrying out these economic activities, people make transactions between different sectors of the economy. Because of these transactions, income and expenditure move in a circular form. This is called the circular flow of income.
It refers to the geographical territory administered by the Government of India within which the person, goods, and capital can circulate freely. The market price of any good or service in the current year is called the Nominal Price or Current Price. Since inflation is included in the current market price, the Nominal Price or Current Price changes as per the current level of inflation.
In order to compare the National Income of various years, it is calculated with reference to a particular year. This reference year is called the Base Year, and the market price of any good or service in the base year is called the Base Price or Constant Price. Depreciation, also known as the Consumption of Fixed Capital, refers to the loss in value of fixed assets due to wear and tear, accidental damages, and obsolescence.
Net Factor Income from Abroad NFIA is equal to the difference between factor income rent, wages, interest, and profit earned by normal residents of India temporarily residing abroad and factor income earned by non-residents temporarily residing in India. Capital Output Ratio COR refers to the amount of capital investment needed to produce one unit of output.
