Explain How Estimate of National Income May Be Used as the Basis for Investigating the Economic Welfare of a Country’s Population

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Explain how estimate of national income may be used as the basis for investigating the economic welfare of a country’s population. The essential aim of an efficient country’s economy is to render its population the optimal economic welfare. In the academic field of welfare economics, some researchers insist that economic welfare could be investigated simply based on national income. However, because of the unequal income distribution and poverty, their perspectives are not strongly enough that the gross national income could not totally indicate each citizen’s economic welfare, which refers to the level of prosperity and quality of living standard in the society. The main purpose of this essay is to establish a possible model for estimating economic welfare in an economy after a detailed analysis on national income and unequal income distribution. In order to obtain a relatively realistic formula, this essay will cite and compare two main estimating approaches for national income, then explain how the estimates of national income may be used as the basis for investigating the economic welfare of all the citizens in a country. In this analysis, Lorenz Curves will be used to support that economic welfare should be linked to Gini coefficient. Estimates of National income National income equals to the total wealth of a country. According to Todaro & Smith (2003), two main approaches are usually used to calculate national income. Initially, the gross national product (GNP) is defined to be the total value of final goods and services produced by the residents’ assets. Then, with the rapid expansion of economic globalization, another index named the gross domestic product (GDP) is increasingly adopted in official reports and academic researches. This index could show the level of the total value produced by an economy. Briefly, the main difference between GNP

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