There are three methods of measuring national income, they are as follows:

(a) Product methods or output method: Under this method, a census of all goods and services are conducted to get the correct picture of total national production. While,calculating total volume of goods and service, the following four items are to be included.

1. All kinds of consumption goods and services. 

2. Gross domestic investment, which includes inventories, capital formation, construction of houses etc. 

3. Production in the public sector. 

4. Export minus imports.

(b) Income method: National income is the result of the combined and co-operative efforts put in by all factors of production. Alter employing them, we have to remunerate them in the form of rent, wages, interest and profits.

This method may be represented in the following equation. Y = (r + w + i + p) + (X – M) + (R – P), where r – rent, w – wages, i – interest, p – profit, X – exports, M imports, R – receipts, P – payments.

(c) Expenditure method: Incomes earned by factor inputs are spent on buying different goods and services. If we add the total expenditure incurred by all people in a years’ time, then we get total income of the people. Income determines the expenditures. All kinds of expenditures are to be taken into account while calculating the national income of a country. They are

i. Personal consumption expenditures of all people on all kinds of goods and services. 

ii. Gross domestic investment or investment expenditures made by all businessmen in a year. 

iii. Gross Governments’expenditure on all kinds of goods and services. 

iv. Net foreign investment, exports – imports. 

This method may be represented with the help of the following equation. 

Y = (C +I + G) + (X – M) + (R – P), where, C – Consumption, I – Investment, G – Government’s Investment, X – exports, M – Imports, R – Receipts and P – Payments.