Let me first explain the concept with reference to a short story. Supposing we go to a shop to purchase a product for the price of Rs. 100. Now this Rs. 100 will have three different names i.e. (i) Income of the shopkeeper = Rs. 100/- (ii) Expenditure of the consumer = Rs. 100 and (iii) Money value of the good produced and transacted in the economy, commonly known as national income, can be defined in the same three way.

Samuelson says, “It is the loose name we give for the money, measure of the overall annual flow of the goods and services in an economy”.

Prof. Samuelson explains than national income is the money value of all the final goods and services produced in the country in a given period of time, preferably one year. Final goods are such as furniture rice, electrical appliances etc. and services produced in their final form are of advocates, doctors and engineers etc. These final goods and services command rice in the market. Thus the money value of the goods and services produced in a certain period i.e. 3(one year) in their final form is summed up together to measure the national income.

Ackley define, “Individual’s income is the amount of his earning from the productive services currently rendered by him by his property. National income is nothing more than the sum of all the individual incomes.”

Prof. Ackley defines national income on the basis of individual’s income. He divides individual’s income into two categories;

Reward for the productive services of the individual and / or
Reward for the productive services rendered by the individual’s property.

Both within a certain period preferably one year. Generally in a society an individual performs his productive services by being a laborer or by being an entrepreneur and gets his reward through wage and profit respectively. Those who are unable to get their income by the individual productive services earn their income through services rendered by the property in the form of rent and interest. Thus the individual income can be earned by either wages and profit or rent and interest.

Thus, prof. Ackley defines national income as being the sum total of all individual’s incomes as defined above or in other words the sum total of rent, interest, wages and profits produced in one year would amount to national income.

Brookman says, “National expenditure becomes the total expenditure of consumer’s spending, public authorities spending and capital formation at home and overseas i.e. the sum total of final expenditures by the residents of the country.”

Prof. Brookman’s definition of national income shows that the aggregate expenditure by the people on consumer goods and capital goods and also the similar expenditure by the government at home or abroad in a specified period preferably one year become part of the total expenditure and henceforth the national income.

After having briefly looked into the three alternate definitions of national income we shall now reach a concluding point.

You can see that all the three definitions are explaining the same thing i.e. national income. The reason for this is that national income is represented by the money value of all the final goods and services produced in a country. Since these goods and services are produced by the four factors of production throughout the year, money value of all these goods and services is distributed among the four factors of production as reward. Thus the sum total of reward to factors of production also amounts to national income.

People generally divide their income into two parts i.e. one part is consumed and the other is saved and invested. Therefore the sum total of expenditure on consumer and capital goods both in the private as well as public sector at home or abroad will be known as the national expenditure which is the same thing as national income.