Thus, under income approach GNP is found by adding up the total factor incomes generated in producing the national product.Under this method we add up personal consumption expenditures, the gross private domestic investment, the Government purchase of goods and services and the net foreign investment to obtain GNP at market prices. Our mission is to provide an online platform to help students to discuss anything and everything about Economics.

It consists in finding out the market value of all goods and services produced in a country during a given period.We sum up the value of the gross product of all producers in an industry and from this total are deducted the value of the intermediate products consumed and depreciation of equipment during the process of production.A net figure of this kind is found for each industry.

Explain the three main methods of computing national income? Structure of the answer. There are generally four factors of production labour, capital, land and entrepreneurship. In the value of final product, bread, the values of these intermediate goods are hidden.Hence a separate accounting of the values of intermediate goods, along with the accounting of the value of final product, ‘ would mean double counting. According to the social accounting method various types of transactions are classified in different groups.

The following are some of the most popular methods of measuring national income: (i) Product or Value Added Method

In satisfying the consumers’ final demand for bread, it is assumed that there are four productive stages.

100 which is his profit for merchandise business, a “productive” activity.

Some of the most standard identities used are GDP, GNP, National Income, etc. 1.In Fig. This leads to the problem of double counting which leads to the overestimation of national income. In this method of national product measurement, the GNP is regarded as a flow of total goods and services bought through the money payments by the community.However, money value of the GNP obtained through expenditure method might differ from the value of GNP obtained through the product method, because the total purchases, by the community during any given time period may be either more or less than the total production of the period.In case there are excess purchases during the given period, inventory stock will decline; otherwise, inventory stock at the end of the period will be higher to the extent the purchases during the period, fall short of their total production during the given period.

Households sell their productive services as factors of production to the firms and earn their income. It consists in finding out the market value of all goods and services produced in a country during a given period.

700. These are producers, traders, final consumers, etc.

Estimates of national income are prepared after taking into consideration the figures of transactions of certain representative persons with similar economic position belonging to different groups.It is not possible to estimate correctly the national income by adopting a particular method. Estimates of national income are prepared after taking into consideration the figures of transactions of certain representative persons with similar economic position belonging to different groups.It is not possible to estimate correctly the national income by adopting a particular method.

The important concepts of national income are: Gross Domestic Product (GDP) Gross National Product (GNP) Net National Product (NNP) at Market Prices. (250 words) Key demand of the question . Indirect taxes, included in prices, are to be deducted for getting the exact value of the products.

Values are created in the productive area. The total money payments made to the factors of production in the economy represent the total money value at factor cost. are to be deducted from the total of factor incomes. 100 in the economic system. Thus, aggregate output, income and expenditure must equal.This is another method of measuring national income developed by Richard Stone in recent times.

So, its net income is Rs.

This mixed method was followed in India in 1948-49 by National Income committee because production or income method alone could not give correct results.Welcome to EconomicsDiscussion.net! Thus, the value of final output includes the value of intermediate products. Obviously, the sum total of value added at each stage of production, Rs. Thus, in turning wheat into flour (that is, the creation of form utility), the value added is Rs.

Thus, national income at industrial origin can be easily compiled from the value added approach.

Income/Factor Income Method. The addition of net income from abroad to this total would give us net national income at factor cost.This method consists in adding together all the income that accrue to the factors of production by way of wages, rents, interests and profits. GDP is calculated by three methods.

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