Economics studies how a nation utilises its limited resources for production, distribution, and consumption of goods and services. Among the key macroeconomic indicators that help assess a country’s economic performance are national income, national wealth, inflation, GDP, GNP, and unemployment. These indicators collectively reflect the economic health, growth pattern, prosperity level, and policy outcomes of a nation.
NDA & CDS 1 2026 Exam GK – Economics – Class 1
1. National Income
National Income refers to the total value of all final goods and services produced by the normal residents of a country in a given financial year. It is one of the most important indicators that shows the economic strength and living standards of a population.
Methods of Calculating National Income
- Production Method – Calculates the net value added by various productive sectors like agriculture, industry and services.
- Income Method – Sums up all incomes earned by factors of production, such as wages, rent, interest and profit.
- Expenditure Method – Adds up all final expenditures made by households, government and firms.
Components
- Compensation of employees
- Operating surplus (profits, rent, interest)
- Mixed-income of self-employed
National Income helps governments frame policies on taxation, subsidies, planning and welfare schemes.
2. National Wealth
National Wealth is the total stock of all tangible and intangible assets possessed by a country at a given point in time. Unlike national income, which is a flow concept, national wealth is a stock concept.
Components of National Wealth
- Land and natural resources
- Buildings, machinery, infrastructure
- Financial assets
- Human capital (skills, education)
- Foreign assets and reserves
A growing national wealth indicates long-term economic prosperity and productive capability.
3. Inflation
Inflation is the sustained rise in the general price level of goods and services in an economy over a period of time. When inflation rises, the purchasing power of money falls.
Types of Inflation
- Demand-pull inflation – Excess demand over supply.
- Cost-push inflation – Rising production costs (e.g., higher wages, raw materials).
- Built-in inflation – A result of wage-price spiral.
Measurement in India
- Consumer Price Index (CPI) – Used for inflation targeting by RBI.
- Wholesale Price Index (WPI) – Measures price changes at the wholesale level.
Inflation impacts interest rates, savings, investments and overall economic stability.
4. Gross Domestic Product (GDP)
GDP is the total monetary value of all final goods and services produced within a country’s geographical boundaries during a given year.
Types of GDP
- Nominal GDP – Calculated at current prices.
- Real GDP – Adjusted for inflation.
- Per Capita GDP – GDP divided by total population, indicating average income.
GDP is the most widely used measure of a nation’s economic performance and growth rate.
5. Gross National Product (GNP)
GNP measures the total output produced by the residents of a country, irrespective of whether production takes place within the country or abroad.
Difference between GDP and GNP
| Basis | GDP | GNP |
|---|---|---|
| Measures | Production within domestic territory | Production by residents of a country |
| Includes | Foreign companies operating in India | Indian companies operating abroad |
| Excludes | Income earned by Indian companies overseas | Income of foreign companies operating in India |
Formula:
GNP = GDP + Net Factor Income from Abroad (NFIA)
GNP is useful to understand the economic participation of residents globally.
6. Unemployment
Unemployment refers to the situation where people who are willing and able to work at the prevailing wage rate do not find employment.
Types of Unemployment
- Frictional Unemployment – Short-term unemployment due to job switching.
- Structural Unemployment – Due to mismatch of skills and technological changes.
- Cyclical Unemployment – Caused by economic slowdown or recession.
- Seasonal Unemployment – Common in agriculture and tourism sectors.
- Disguised Unemployment – More people employed than required; common in rural India.
Measurement in India
- Periodic Labour Force Survey (PLFS)
- Unemployment Rate = (Unemployed / Labour Force) × 100
High unemployment affects consumption, investment, tax revenue and national productivity.
Conclusion
Understanding these macroeconomic concepts is essential to evaluate the performance of an economy. National income and wealth show long-term economic strength, GDP and GNP measure production and income levels, inflation reflects the price stability, and unemployment signals the health of the labour market. Together, they guide policymakers in making informed decisions to improve economic welfare and growth.
