National income is an aggregate value of goods and services produced during financial year within the domestic territory.
It is the money value of all goods and services produced during the financial year.
1. Expenditure Method
In the expenditure method , all the economics transaction activities are analyzed from expenditure point of view. i.e. National income is estimated from expenditure done by economic agents. Thus, expenditure methods arrives at national income be adding up all expenditure made on goods and services during a year.
2. Income Method
In this method , National income is treated to be equal to all the incomes occuring to the basic factors of production used in producing the national product. In the income methods of calculation national income is treated by three components :
a. Labour Income
b. Capital Income
c. Mixed Income
3. Value Added Methods/Value Added Approach
According to this approach, the national income is measured in the form of total product obtained from each economic sector , such as primary sector, secondary sector and territary sector.
a. Primary sector : Primary sector incorporates agriculture,fishing,mining and quarrying.
b. Secondary sector : It incorporates manufacturing ,construction,electricity,gas and water supply.
c. Territary Sector : It includes banking, insurance, transport and communication, defense,trade and commerce, administrative and other services.
It is the money value of all goods and services produced during the financial year.
Methods of Measuring National Income
1. Expenditure Method
In the expenditure method , all the economics transaction activities are analyzed from expenditure point of view. i.e. National income is estimated from expenditure done by economic agents. Thus, expenditure methods arrives at national income be adding up all expenditure made on goods and services during a year.
2. Income Method
In this method , National income is treated to be equal to all the incomes occuring to the basic factors of production used in producing the national product. In the income methods of calculation national income is treated by three components :
a. Labour Income
b. Capital Income
c. Mixed Income
3. Value Added Methods/Value Added Approach
According to this approach, the national income is measured in the form of total product obtained from each economic sector , such as primary sector, secondary sector and territary sector.
a. Primary sector : Primary sector incorporates agriculture,fishing,mining and quarrying.
b. Secondary sector : It incorporates manufacturing ,construction,electricity,gas and water supply.
c. Territary Sector : It includes banking, insurance, transport and communication, defense,trade and commerce, administrative and other services.
Problems in measuring national income
1. Non-monetary transactions
2. Problems of double counting
3. The underground economy
4. Petty production
5. Public services
6. Transfer payments
7. Capital gains or loss
8. Price changes
9. Wages salaries paid in kind
10. Illitracy and ignorance
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