All formulas of national income ?
Answers
National Income can be measured on any of the three ways, national income calculated by adding up every one's income,by the output of all the final goods, by the value of goods purchased by every individual and adding to their savings.
There are three methods of measuring NI:
1) Output method or Product Method:
This method refers to the calculating NI by adding the final value of all the goods and services &then multiplying them to their respective market prices to get the GNP at factor cost.
FORMULA: (P1, P2, .....Pn) + DEPREICIATION + INDIRECT TAXES + NET INCOME FROM ABROAD
2) Income Method:
In this method NI is calculated by bringing all the factors of production aggregated at one place. They recieve income in the form of wages, rent, interest, profit.
FORMULA: W+I+R+P+NET EXPORTS+NET INCOME FROM ABROAD.
W=wages
I=interest
R=Rent
P=Profit.
Also,
INCOME FROM EMPLOYMENT +INCOME FROM SELF EMPLOYMENT+GROSS TRADING FROM INDUSTRIES+GROSS TRADING FROM PRIVATE ENTERPRISES+GROSS SURPLUSES FROM GOVERNMENT FIRMS+IMPOSED CHARGES ON UNAUTHORISED USE OF NON-TRADING CAPITAL=TOTAL DOMESTIC PRODUCT+RESIDUAL ERROR+STOCK OF MATERIALS=GROSS NATIONAL PRODUCT.
3)Expenditure method:
In this method the expenditure made by household, expenditure by firms, by government professionals,net exports,net income from abroad is calculated.
FORMULA: EH+EF+EG+NET EXPORTS+NET INCOME FROM ABROAD.
EH= Expenditure by household
EF= Expenditure by firm
EG= Expenditure by Government