Measurement of national income

BY. SUBHODEEP SENGUPTA CLASS. XI’C’

SUBJECT…ECONOMICS

MEASUREMENT OF NATIONAL INCOME

NATIONAL INCOME OF A COUNTRY CAN BE MEASURED BY THREE DIFFERENT METHODS…

Value added/ output/ product method

Income method/ distribution method

Expenditure method/ disposition method

Final product approach method

Final product is broadly called Gross Domestic

Product. GDP is defined as monetary value of all the final goods and services produced by all

producing units located in the domestic territory of a country in an accounting year. It is estimated by multiplying the gross product

with market prices.

GDPMP=Price×Output

According to this method, national income is calculated by adding ‘net value added at fc’ by all the producing units during an accounting year within the domestic territory. By adding net factor income from abroad to domestic income, we get national income. In value added method, domestic income is estimated at the stage of production that is at the stage of value addition.

NVAFC=GVAMP-Depreciation-NIT

Value added approach method

STEPS FOR ESTIMATINGNATIONAL INCOME Primary sector: which exploits natural

resources e.g., agriculture, fishing, mining etc.

Secondary sector: which transforms one type of commodity into another e.g., cloth produced from cotton etc.

Tertiary sector: renders service e.g., banking, insurance etc.

CALCULATION OF GDPMP OR GVAMP

• First gross value added is calculated foe each sector separately and then added to find GDPMP(GDPMP=VAMP)

• GVOMP=Sales + Change in stock• =Sales + (closing stock – opening stock)

*Calculation of DomesticIncome(NDPFC)

NDPFC=GDPMP-Depreciation - NIT

*Calculating of National Income (NNPFC)

NNPFC= NDPFC + NFIA