Measures of National income
National income is the total income received by providers of facors of production in a country over a given period of time.
It can be determined using any of the following 3 approaches.
1. Expenditure Approach
Here, national income is arrived at by summing up the buyers' expenditure on all final goods and services. Only products that have reached the final stage of production are included.
It is divided into categories as follows.
Expenditure on consumer goods(C)
Expenditure on capital goods(I)
Expenditure by government (G)
Expenditure on net imports (X-M) where X=exports, M=imports
2. Income Approach
All the money received by participants in the production process is summed up. This is in the form of wages, rent, interests and profits. However incomes earned for purposes other than for producing goods and services are ignored, ( lottery, transfer payments, pension, grants) such would lead to double counting.
3. Output Approach
National income is arrived at by adding the total contributions made by various sectors of the economy in the production process. For instance all the money made from agriculture, energy, manufacturing, transport and other sectors are summed up.
Aeren answered the question on June 20, 2018 at 11:00
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