National Income - Two sector model , three sector model and four sector model
How Do You Calculate The National Income Of A Given Country?
The labor and capital of a country working on the natural resources produce annually a certain amount of goods and services, the aggregate of which is known as the national income or national product. Usually National income is expressed in terms of money; therefore national income or national product is equal to the total money value of goods and services produced in the economy during the year. There are many concepts of national income, which are used by economists, all of which are interrelated. The national income is calculated by subtracting indirect taxes from NNP and adding subsidies to it.
Indirect taxes are those, which are usually included in the market prices of goods and services. Subsidies are monetary assistance given by government to firms for keeping market prices below the factor cost. National income or national product at factor cost can also be regarded as the total income earned by all the factors of production working in the economy during the one year. In this way it is equal to the sum total of the income received by factors of production during one year. It is equal to the sum of wages, interest, rent and profit in a given year.
Indirect taxes are those, which are usually included in the market prices of goods and services. Subsidies are monetary assistance given by government to firms for keeping market prices below the factor cost. National income or national product at factor cost can also be regarded as the total income earned by all the factors of production working in the economy during the one year. In this way it is equal to the sum total of the income received by factors of production during one year. It is equal to the sum of wages, interest, rent and profit in a given year.
Basically, national income can be calculated by three methods.1.value added method2.expenditure method3.income method.
First,we will add all factor income earned by the residents of a county.thus, we will get national domestic product at factor cost.then,we will add net factor income from abroad to it.which results in national income.
First,we will add all factor income earned by the residents of a county.thus, we will get national domestic product at factor cost.then,we will add net factor income from abroad to it.which results in national income.