(i) A country with a high national income enjoys greater economic welfare and higher standard of living.
(ii) But the per capita income as an index of economic welfare has some limitations.
(iii) Welfare depends on the composition of goods and services. If more capital goods over consumer goods are produced welfare will be lesser.
(iv) Higher GDP with greater air, water, soil pollution will affect welfare.
(v) Production of war goods will increase output but not welfare.
(vi) If more women and children are employed or workers are forced to work for long hours economic welfare is affected.
(v) Therefore the Physical Quality of Life Index is a better indicator of economic welfare than national income.

(i) To avoid double counting, either the value of the final output should be taken into the estimate of GNP or the sum of values added should be taken.
(ii) The value of the final product is derived by the summation of all the values added in the productive process.
(iii) Any commodity which is either raw material or intermediate good should not be included.
(iv) For example, value of cotton enters value of yarn as cost, and value of yarn in cloth and that of cloth in garments.
(v) At every stage only the value which is added should be considered.

(i) The total expenditure incurred by the society in a particular year is added.
(ii) It includes personal consumption expenditure (C), net domestic investment (I), Government expenditure on consumption and capital goods (G) and net exports (X - M).
\(\mathrm{GNP}=\mathrm{C}+\mathrm{I}+\mathrm{G}+(\mathrm{X}-\mathrm{M})\)
(iii) Second hand goods, purchase of shares and bonds, transfer payments and expenditure on intermediate goods must not be included.

(i) It is the total of income payment made to factors of production.
(ii) From the money value of NNP at market price, we deduct indirect tax and add subsidy.
(iii) \(\mathrm{NNP}_{\mathrm{FC}}=\mathrm{NNP}_{\mathrm{MP}}-\) Indirect taxes + Subsidies