National Income is defined as which of the following?

• A. Total spending by the government
• B. Total revenue of firms
• C. Total amount of goods and services produced in an economy
• D. Net exports

Answer: (C)

National income measures the total value of the goods and services produced within a country during a given period, i.e., the economy’s output. This is essentially GDP, the market value of all final goods and services produced domestically, summed either by value added, expenditures, or income approaches. Because it captures production across the whole economy, it best fits the definition of national income.

Spending by the government, while important for demand, is just a component of GDP, not the full measure of national income. The total revenue of firms is not national income, since it doesn’t account for costs and value added. Net exports reflect only the trade balance and are part of GDP, not the entire income from production.