Question

Define and provide examples of each of the following.

1. Nominal vs. real wage
2. Labour income vs. supplementary labour income
3. Gross National Product (GNP) vs. Labour’s share of GNP

Answer 1

a. Nominal wages are wages received by a worker in the form of money i.e. they are the money wages. Real wages on the other hand are the amount of goods and services that the worker can purchase from his/her nominal wages.

b. Labour income is the income generated in the products of goods and services due to the labour factor of production. It includes wages, salaries and supplementary labour income. Supplementary labour income is employers' contributions or payments to employee benefit plans for health and financial well-being of employees and their families.

c. Gross National Product (GNP) is the total value of all final goods and services produced by the residents of a country. GNP is the sum of personal consumption expenditures, private domestic investment, government expenditure, net exports and any income earned by residents from overseas investments, minus income earned within the domestic economy by foreign residents.Labour share of GNP is the share of labour force in the total GNP.