measurement of income

MEASUREMENT ofNATIONAL

INCOME of an economy

What is National Income?

NATIONAL INCOME

money value of final outputs which comprises of goods and services produced by a country during a year.

GDP & GNP

GDP = Gross Domestic Product, is the value of all final goods and services produced by all sectors of the economy the citizens or foreign sectors within a country.

GNP = Gross National Product, is the value of all final goods and services produced by all citizens of a country (within a country or abroad).

METHODS OF MEASURING NATIONAL INCOME NI can be measured using 3 common method:

a) Income method

b) Output method

c) Expenditure method

Irrespective of which approach used in calculating NI, will give us the same value

I) INCOME METHOD

• National Income is the total money values of all incomes received by productive persons and enterprises in the country during the year.

• It is the total income of all factors of production including the income of self-employed person, labourers, capital and land .

NI= wages +rents + profits + interest of capital.

II) OUTPUT METHOD

1. Also known as value added method.

2. 3 stages:• estimating gross value of domestic o/p• determining material cost• deducting these cost from gross value

III) EXPENDITURE METHOD2 approaches used here:

a) Sum of all the money expenditures at market price.b) Sum of value of all the products finally disposed off.

MEASUREMENT OF NATIONAL INCOME IN INDIA

• Input method is used for service sectors

• Output method is used for commodity producing sectors

• National in come divided into 15 sectors

Ashita Sethi100906022