What is National rent?

What Does National rent Mean

The term income can be understood as the profit or benefit that is obtained from something. National , for its part, is what is linked to a nation (country, people, community).

The idea of national income refers to the income generated by the factors of production in a country in a certain period, without counting those services or intermediate goods that are used within the framework of the production process.
The most common method for calculating national income is to add up all the final goods and services in a year. Counting intermediate goods is avoided as otherwise they would be counted twice.

By performing the calculation every year, it is possible to estimate whether the economy of the country in question is growing or, conversely, contracting. In addition, it is possible to know how the income distribution is carried out and what is the contribution of each productive sector to the national economy.
It is an instrument of great value to carry out the analysis of the result of the economic process, specifically by measuring the amount of goods and services that a country has used over a year.
When calculating national income, state expenditures on goods and services are generally included , but not funds intended for private citizens (such as pensions or pensions). On the other hand, net exports (derived from total exports minus total imports) are usually taken into account .
National income can be used for consumption , investment or savings . Most of the national income is directed to the consumption of products and services: that is, it is spent. The rest is invested to generate future income or saved without being used for any productive purpose.
We speak of investment precisely when the saving that represents the national income is used in order to acquire goods that are then applied to production. The consumer , meanwhile, aims to meet the diverse needs of the various players in the economy, and is associated with the concept of 'expenditure', as we mentioned in the previous paragraph.
Another destination that has the portion of the national income that is neither consumed nor invested, is the export to foreign countries. In this case, it is necessary to distinguish between two types of economy: a closed one, in which investing is equivalent to saving, since the saving that is destined to the purchase of capital goods is inevitably transformed into an investment; an open one, which contemplates the export and import of goods, and where savings and investment are not usually equivalent.

The equation in which latter case can be seen as follows: (GDP - C) - I = X - M . Let's see what each variable corresponds to:
* GDP is the Gross Domestic Product , that is, the magnitude with which we can express the value in money of the production that a country carries out over a given period (usually one year) of products and services ;
* C is Total Consumption , which includes both public and private;
* I represents the set of public and private investment ;
* X expresses the value of the country's total Exports ;
* M is the total of Imports carried out throughout the period.
It is also possible to say that saving ( A ) is the GDP less consumption , so the above equation may be expressed as follows: A - I = X - M .

Go up