# What Are The Methods Of Measurement Of National Income?

Measurement of national income in an economy is very important because it gives an estimation of the welfare of the economy. National income is the total of the value of the goods and the services which are produced in an economy. The basic measures of national income include GDP, GNP, GNI, NNP and NNI. There are three approaches through which national income can be calculated including; output approach, income approach and expenditure approach. All of these approaches give the same value of the national income.

The method for calculating National Income by Output, Value Added method:

GDP at market price = Value of Output in a year - Intermediate consumption

NNP at factor cost  = GDP at market price - Depreciation + NFIA (Net Factor Income from Abroad) - Net Indirect Taxes

The measurement of National Income by Income Method:

NDP at factor cost = compensation of employee + operating surplus + Mixed income of self employee

National Income    = NDP at factor cost + NFIA (net factor income from abroad)

The measurement of National Income by Expenditure Method:

GDP = C + I + G + (X - M)

Where:

C = Personal consumption expenditures
I = Gross investment
G = Government consumption
X = Gross exports
M = Gross imports
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We have three methods to measure national income.
1. Total output method .
In this method we take the summation of monetary value of final goods and services produce in a economy during a year.
2. Factor income method.
IN THIS METHOD WE TAKE THE SUMMATION OF REWARDS OF FACTORS OF PRODUCTION IN A ECONOMY DURING YEAR
3. TOTAL EXPENDITURE METHOD.
IN THIS METHOD WE TAKE THE SUMMATION OF TOTAL EXPANDATURES BY THE PRODUCERS OF PRIVATE SECTOR AND GOVT SECTOR IN AN ECONOMY DURING A YEAR.
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Explain the method of measuring the national income of your country
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There are three methods which are commonly used for the measurement of national income. These methods include output value added method, income method and expenditure method.

National Income by Output, Value Added method:

GDP = Value of Output yearly - Intermediate consumption

NNP @ factor cost  = GDP at market price - Depreciation + NFIA - Net Indirect Taxes

National Income by Income Method:

NDP @ factor cost = compensation of employee + operating surplus + Mixed income of self employee

National Income  = NDP  + NFIA

National Income by Expenditure Method:

GDP = C + I + G + (X - M)

For complete details: National income measurement
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The output approach
The output approach focuses on finding the total output of a nation by directly finding the total value of all goods and services a nation produces.
Because of the complication of the multiple stages in the production of a good or service, only the final value of a good or service is included in total output. This avoids an issue often called 'double counting', wherein the total value of a good is included several times in national output, by counting it repeatedly in several stages of production. In the example of meat production, the value of the good from the farm may be \$10, then \$30 from the butchers, and then \$60 from the supermarket. The value that should be included in final national output should be \$60, not the sum of all those numbers, \$100. The values added at each stage of production over the previous stage are respectively \$10, \$20, and \$30. Their sum gives an alternative way of calculating the value of final output.
Formulae:
GDP(gross domestic product) at market price = value of output in an economy in a particular year - intermediate consumption
NNP at factor cost = GDP at market price - depreciation + NFIA (net factor income from abroad)- net indirect taxes
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Income method
expenditure method
output method
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Methods of computing national income
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