National income is the final outcome of total economic activities of a nation. Economic activities generate two kinds of flow in a modern economy namely, product-flow and money-flow. Product-flow refers to flow of goods and services from producers to final consumers. Money flow refers to flow of money in exchange of goods and services. In this exchange of goods and services, money income is generated in the form of wages, rent, interest and profits, which is known as factor earning. Based on these two kinds of flows, national income is defined in terms of:
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- Product flow
- Money flow
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