What is the calculation of national income on domestic basis called?
Answers
Answer:
It is sum total of domestic factor income (DFI) and net factor income from abroad.(NFIA). In other words it is Net National Product at factor cost (NNP at factor cost).
DFI- includes
Compensation of employees-(i) salaries and wages (ii) social security contributions.
Operating surplus- It is income from property and entrepreneurship- interest, rent, profit, royalty and dividends.
NFIA- includes-(i) Net compensation of employees (ii) Net income from property and entrepreneurship (iii) Net retained earnings of resident companies abroad i e net undistributed profit.
Three are three approaches to estimate national income-1. Output method 2. Income method 3. Expenditure method.
Output method is used in primary sector and for registered manufacturing units. Income method is used in tertiary sector also known as service sector and for unregistered manufacturing units . Expenditure method is used in the field of construction where it is also known as “ commodity flow method”.