What is the Difference between National Income and Personal Income
Income adds value to the living standard of people. As much as one earns, his life style moves upwards. Income or the output resulted from the input of production units, defines not only the value of some one’s personal living but also an aggregate value of living in a country. This then becomes the national income. National income does not only mean the income generated by individuals. Below is given a broader outlook of both.
National Income
National income is the total added value to the economy by the input of production factors. National income is generated by the tax or surplus earned by the govt. Some of its part is retained as reserves and invested back into the business entities. Some of it is called foreign factor while the rest flows to the families i.e. in the form of wages or salaries. National income calculated by GDP (gross domestic product). The higher the GDP is the better the economy of the country is.
Personal Income
As much as an individual earns in a period of time is called his personal income. Personal income is calculated on yearly basis i.e. the total earnings of the person in a year. As much as a person earns, obviously his living standard rises. But not every penny of the individual earnings is owned by him. Few he pays out in taxes and few in some other govt. impositions.
National Income vs Personal Income
National income defines the overall performance of a country’s economy in a year while personal income defines a person’s earned money within a year. National income defines the downfall or rise in the economic position of the country in the world while personal income defines the standard of living of an individual. The higher the national income means the higher the standard of living of that economy. In short, national income sets the position of the country’s economy in the world. While personal income might be higher in a poor country.
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