Question

Income method formula​

Answer 1

Answer:

What is Income Method?

Q.1 Calculate the NDP at FC by using the income method.

S. No. Items Amount ( in crores)

(i) Income from domestic products accruing to private sector 4,000

(ii) Income from domestic products accruing to public sector 2,000

Answer 2

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$\dashrightarrow$ what is income method ?

• It is a process of calculating national income by considering the factors income of an economy.

$\dashrightarrow$ Formula of income method ?

• National income (NNPFC) = Net domestic product at factor cost(NDPCF) + Net factor

$\dashrightarrow$ Steps of income method ?

Step 1: Identify and classify the production units:

• All the producing enterprises employing various factors of production are identified and classified into primary secondary and tertiary sectors.

Step 2: Estimate the factor income paid by each sector:

• The factor incomes paid by each sector are classified under the following heads:

(i) Compensation of employees; (ii) Rent and Royalty; (iii) Interest; (iv) Profit; and (v) Mixed Income.

Step 3: Calculate Domestic Income (NDPFC):

• When factor incomes of all the sectors are summed up, we get domestic income (NDPFC). In short, NDPFC = Compensation of Employees + Rent and Royalty + Interest + Profit + Mixed Income

Step 4: Estimate net factor income from abroad (NFIA) to arrive at National Income:

• In the final step, NFIA is added to domestic income to arrive at National Income (NNPFC), i.e. NNPFc = NDPFc + Net factor income from abroad.