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

Answer 1

The Correct Option is B

Step 1 — Recall the concept of National Income:
National Income is a key measure in economics that represents the total monetary value of all final goods and services produced by a country in a given period, usually one year.

Step 2 — Income method of measuring National Income:
According to the income method, National Income is calculated as the sum total of all factor incomes earned in the production process. These factor incomes include:
- Wages and salaries (labour)
- Rent (land)
- Interest (capital)
- Profits (entrepreneurship)

Step 3 — Why other measures are not exact definitions:
- National Income is not the total value of goods alone (that’s Gross Domestic Product at market price).
- It is not government revenue or taxes collected.
- It specifically refers to factor incomes generated within the economy.

Step 4 — Conclusion:
Hence, National Income of a country is defined as the sum total of factor incomes earned by its residents from production activity within a given time.

Final Answer:
The correct option is (B) : sum total of factor incomes.