Question

Explaim how national income is obtained as the sum total of income of the factor of production

Answer 1

Answer:

Payment for the use of labour is known as wages and payment for the use of capital is known as interest. ... By national income we mean the sum-total of all rent, wages, interest and profit earned in the production process during a given period by all the citizens, which is known as the factor payments total.

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Answer 2

National Income or the overall GDP of any country represents the total or aggregate market value of all the goods and services produced by the country within a certain period of time.The market value of all the goods and services ideally reflect the aggregate factor income earned due to the overall production level in the country.

Explanation:

The National Income or GDP level of any country reflects the overall or aggregate market value of all the goods and services produced by the country within a particular time period.The factor income or payments represents the income earned by the owners of the factors/inputs of production for providing or supplying them in the overall production process.Factors/inputs or production basically includes resources or inputs used in the production process of goods and services such as land,labor,capital,human resources,raw materials and so forth.Therefore,the  total factor income or the payment in the economy also denotes the total or aggregate cost or expense of production to produce the goods and services in the economy.Based on the Neoclassical theory of production,the cost or expense of production is practically translated or converted into the final market value or price of the finished goods and services that are sold to the consumers or buyers in the final market.Hence,during the calculation of the final value of all the goods and services produced by the country in a particular time period,the total value of the factor income/payment is also considered as it ideally reflects the market price or value of all the finished goods and services exchanged in the economy.