I have emphasized from the outset that the main interest in this field lies in the presentation of the structure of transactions, and the simplest form of this structure which I believe brings out all the essential features, but avoids unnecessary complications, is contained in Diagram 3. Let us now consider the relationship between this structure and such familiar aggregates of transactions as the national income, the gross national product and the like.

The flow from production to consumption, £9,636 m., represents the income of the factors of production arising from services contributed to British enterprises, enterprises being understood in this context in a broad sense to include individuals working on their own account, landlords, professional persons and those who render individual services. This total may conveniently be termed the domestic product, since it represents the net value of production taking place within the limits of the United Kingdom. The national income is usually denned as the income accruing to the factors of production normally resident in or owned by persons normally resident in the United Kingdom independently of whether their contribution to production is made in this country or abroad. Consequently in order to get the national income we must add to the domestic product the net income from overseas investment, which was £40 m. in 1948, giving a total of £9,676 m. for the national income.