Explain in brief the methods of calculation of national income.

1.	Explain in brief the methods of calculation of national income.
Answer» There are three methods of calculation of national income: (a) Product method or value added method – It is that method, which measures national income in terms of value addition by each producing enterprise in the economy during an accounting year. (b) Income method – In this method, national income is measured in terms of factor payments (wages, rent, interest and profit) to the Owners of factors of production (labour, capital and enterprise) during an accounting year. (c) Expenditure method – According to this method, national income is measured in terms of expenditure on the purchase of final goods and services produced in the economy during an accounting year.

Answer»

There are three methods of calculation of national income:
(a) Product method or value added method – It is that method, which measures national income in terms of value addition by each producing enterprise in the economy during an accounting year.

(b) Income method – In this method, national income is measured in terms of factor payments (wages, rent, interest and profit) to the Owners of factors of production (labour, capital and enterprise) during an accounting year.

(c) Expenditure method – According to this method, national income is measured in terms of expenditure on the purchase of final goods and services produced in the economy during an accounting year.

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