Measures of National Income

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Measures of National Income : 

Measures of National Income

Definition : 

Definition National income is the money value of the end result of all economic activities of the nation. National income is the sum of factor’s incomes – wages, interest, rent & profit received by the owners factors of production, labour, capital, land and entrepreneurship of a nation during one year. National product is the total market value of the final goods and services currently produced by a nation in one year.

Measuring National Income : 

Measuring National Income Net Output or Value Added Method Factor-Income Method Expenditure Method

Concepts or Terms Related to National Income : 

Concepts or Terms Related to National Income GDP at MP GNP at MP NNP at MP NDP at MP NDP at FC GDP at FC GNP at FC Private Income Personal Income Disposable Income

Product Method or Value Added Method : 

Product Method or Value Added Method Net Value Added at Factor Cost in Primary Sector Net Value Added at Factor Cost in Secondary Sector Net Value Added at Factor Cost in Tertiary Sector Net Factor Income From Abroad

Income Method : 

Income Method Wages & Salaries or Compensation of Employees Rental Income Interest Mixed Income Net Factor Income from Abroad Profit- 1. Dividend 2. Corporate Savings 3. Corporate Profit Tax

Expenditure Method : 

Expenditure Method Financial Consumption Expenditure- 1. Private Final Consumption Expenditure 2. Government Final Consumption Expenditure 3. Gross Domestic Capital Formation- (I) Gross Domestic Fixed Capital Formation- a) Expenditure on Construction b) The Final Expenditure on Machinery & Equipment (II) The Expenditure on Change in Stock or Inventories Net Exports

Difficulties in measurement of national income : 

Conceptual difficulties a) Difference between final & intermediate goods b) Change in price c) Services without reward d)Double counting e) Income of foreign companies Practical difficulties a) Existence of barter system of exchange b) Unreliable statistics c) Lack of occupational classification d) Production of self-consumption Difficulties in measurement of national income

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