explain the main steps involved
in measuring National income
through product method
Answers
(i) Identify enterprises which employ factors of production (land, labour, capital and enterprise).
(ii) Classify factor payments into various categories like rent, wages, interest, profit and mixed income (or classify factor payments into compensation of employees, mixed income and operating surplus).
(iii) Estimate amount of factor payments made by each enterprise.
(iv)Sum up all factor payments made within domestic territory to get Domestic Income (NDP at FC).
(v) Estimate net factor income from abroad which is added to Domestic Income to derive National Income.
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Hey Mate !
Following steps are involved in estimating national income by Value added method (Production method)
↔ Identify all the producing units in the domestic economy and classify them into three industrial sectors such as primary secondary and tertiary sectors on the basis of similarity of their activities.
↔ Estimate net value added at FC by each producing unit by deducting intermediate consumption, depreciation and net indirect taxes from value of output, we get net value added at FC.
↔ Estimate net value added of each industrial sector by summing up net value added at FC of all producing units falling in each industrial sector.
↔Compute Domestic Income (NDP at FC) by adding up NVA at FC of all industrial sectors.
↔ Estimate net factor income from abroad which is added to Domestic Income for deriving National Income (NNP at FC). In short by adding net value added at factor cost by all producing enterprises in the domestic territory of the country as discussed above, we get Net Domestic Product at Factor Cost (NDPFC). When we add to it the net factor income from abroad, we obtain Net National Product at Factor Cost (NNPFC) which is called National Income.
Explanation:
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