Explain the Methods of calculating national …

 Methods of Calculating National Income

(i) Income method
(ii) Expenditure method
(iii) Product method or value added method or output method

 Income Method By this method, the total sum of the factor payments received during a given period is estimated to obtain the value of Domestic Income. Depending on the way, the income is earned.
It can be classified into following components:
(i) Compensation of employees
(ii) Operating surplus (rent, profit and interest)
(iii) Mixed income of self-employed

 Computation of National Income (By Income Method)

 Expenditure Method By this method, the total sum of expenditures on the purchase of final goods and services produced during an accounting year within an economy is estimated to obtain the value of domestic income.

 Final Expenditure It is the expenditure on the purchase of final goods and services during an accounting year. It is broadly classified into four categories:
(i) Private final consumption expenditure.
(ii) Government final consumption expenditure.
(iii) Investment expenditure or gross domestic capital formation.
(iv) Net exports, i.e. difference between exports and imports during an accounting year.

7. Computation of National Income (By Expenditure Method)

Value Added Method/Product Method/Output Method By this method, the total value of all the final goods and services produced in an economy during a given time period are estimated to obtain the value of domestic income.

Computation of National Income (By Value Added Method)