Question

State the meaning of national income. Discuss the main methods of its calculation.

Hint:

National income helps compare the economic performance of nations and assess growth over time.

Answer 1

National income refers to the monetary value of all goods and services produced by a country in a given financial year. It indicates the economic strength and living standards of a nation. The three main methods of calculation are: (1) Production method – measures the total output of goods and services produced; (2) Income method – sums up incomes earned by individuals and firms including wages, rent, interest, and profit; (3) Expenditure method – calculates the total expenditure on final goods and services, including consumption, investment, government spending, and net exports. These methods ensure accuracy and provide a comprehensive picture of economic performance.