This is the total value of the income earned by a country’s people in terms of salaries and wages, profits and interest, and rents and pension payments during a given period (thecanadianencyclopedia.com). It works under the assumption that, a person can only get an income because of an economic activity carried out. It a representation of the total level of economic activity, which takes, place in the country in question. Just like the GDP, NI is calculated based on the geographical location of the income earners who must be residents of that particular country.

However, in calculating NI of a country, the indirect taxes and depreciation of the goods are overlooked (thecanadianencyclopedia.com). Hence, National Income is equal to the Gross Domestic Product (GDP) minus indirect taxes and capital consumption allowances (depreciation).

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