Lecture 2 National Income – Measurement and Uses Michael Insaidoo.
Measurement of national income
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Transcript of Measurement of national income
BY. SUBHODEEP SENGUPTA CLASS. XI’C’
SUBJECT…ECONOMICS
MEASUREMENT OF NATIONAL INCOME
NATIONAL INCOME OF A COUNTRY CAN BE MEASURED BY THREE DIFFERENT METHODS…
Value added/ output/ product method
Income method/ distribution method
Expenditure method/ disposition method
Final product approach method
Final product is broadly called Gross Domestic
Product. GDP is defined as monetary value of all the final goods and services produced by all
producing units located in the domestic territory of a country in an accounting year. It is estimated by multiplying the gross product
with market prices.
GDPMP=Price×Output
According to this method, national income is calculated by adding ‘net value added at fc’ by all the producing units during an accounting year within the domestic territory. By adding net factor income from abroad to domestic income, we get national income. In value added method, domestic income is estimated at the stage of production that is at the stage of value addition.
NVAFC=GVAMP-Depreciation-NIT
Value added approach method
STEPS FOR ESTIMATINGNATIONAL INCOME Primary sector: which exploits natural
resources e.g., agriculture, fishing, mining etc.
Secondary sector: which transforms one type of commodity into another e.g., cloth produced from cotton etc.
Tertiary sector: renders service e.g., banking, insurance etc.
CALCULATION OF GDPMP OR GVAMP
• First gross value added is calculated foe each sector separately and then added to find GDPMP(GDPMP=VAMP)
• GVOMP=Sales + Change in stock• =Sales + (closing stock – opening stock)
*Calculation of DomesticIncome(NDPFC)
NDPFC=GDPMP-Depreciation - NIT
*Calculating of National Income (NNPFC)
NNPFC= NDPFC + NFIA