Eco. 102 (Online Discussion/Quiz–22/01/2022—Methods of measuring the National Income)

Answer;
The national income of a country can be measured by three alternative methods:
(i) Product Method
(ii) Income Method, and
(iii) Expenditure Method.

1. Product Method:
In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.
Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.
To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP.
The money value is calculated at market prices so sum-total is the GDP at market prices. GDP at market price can be converted into by methods discussed earlier.
2. Income Method:
Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.

Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.

3. Expenditure Method:
In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

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The methods of measuring the National Income are as follows;
1. Product method
2. Income method
3. Expenditure method

PRODUCT METHOD: In this method, only the value added by each firm in the product process in the outlet figure is included. Hence the value added method is used. This value-added output of all the sectors of the economy is this GNP at factor cost. This method is unscientific because it adds only the value of those goods and services that are sold in the market or are available for sale in the market, without further production process.
INCOME METHOD: Under this method, National Income is measured as a flow of factor incomes. The factors of production we have are land, labour, capital and entrepreneurship, labour gets wages and salaries, land gets rent, capital gets interest and entrepreneurship gets profit as their enumeration. Some self employed person’s employ their own labour and capital such as CAs, advocates, doctors, etc. There income is called mixed income. The sum-total of all these factor income is called NPD at factor cost.
EXPENDITURE METHOD: IN this method, National Income is measured as a flow of expenditure. It consists of two elements; consumption expenditure and investment expenditure. Consumption expenditure includes expenditure of the household sector on goods and services and consumption of outlays of the business sector and public authorities. Investment expenditure refers to the expenditure on the making of fixed capitals such as plant and machinery, building etc.

Name: Ezugwu Kelechi Esther
Reg No: 2020/242047
Email: ezugwukelechi20@gmail.com

3 Important Methods for Measuring National Income

Article shared by : Nwafor Ifeanyi Stanley
2020 /245276

The national income of a country can be measured by three alternative methods: (i) Product Method (ii) Income Method, and (iii) Expenditure Method.

1. Product Method:
In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.

National income
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Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.

To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP.
The money value is calculated at market prices so sum-total is the GDP at market prices. GDP at market price can be converted into by methods discussed earlier.

2. Income Method:

Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.

Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.

3. Expenditure Method:

In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

2020 /245276

The various methods of measuring the national income include:
1) Product method: In this method, national income is measured as a flow of goods and services. Money value of all final goods and services produced in an economy during a year are calculated. Final goods here refer to those goods which are not directly consumed and are not used in further production process.
2) Income method: Under this method, national income is measured as a flow of factor incomes. There are four factors of production: labour,land,capital and entrepreneurship.Labour gets wages and salaries,capital gets interest,land gets rent and entrepreneurship gets profit as their renumeration.
3) Expenditure method: In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure,Government formation and net exports

1. The product method: All goods and services produced during the year in various industries are added up. This is also known as value-added to GDP or GDP at the sector of origin’s cost factor. It is in other words, the amount of the added gross value
2. The income method: In a nation that produces GDP during a year, people earn income from their jobs. Thus the sum of all factor incomes in GDP by revenue method, wages and salaries (employee compensation)+ rent+ interest benefit
3. Expenditure method: This approach focuses on products or services generated during one year within the region. GDP is subtracted from the position of consumption, investment and government spending expended on imports. Likewise all manufactured components, such as raw materials used in the manufactured of products for sale are also exempt. Thus GDP by expenditure method at market prices is net export which can be positive or negative.
Chigbo Juliet Chinwendu
juliet.chigbo.243912@unn.edu.ng
Pure and industrial chemistry

Name – Opogu victory chinagorom
Reg No – 2020/241863
Faculty – physical science
Department – pure and industrial chemistry
Eco 102 Assignment – list and deeply explain the methods of measuring the national income …..
They are;
1.The product method (output)
2. The income method
3. Expenditure method
1. The product method ;its the most direct method of arriving at an estimate of a country’s national income or output, in this the output figures of all firms in the economy is added to get the total value of the nations output, which can be grouped into certain product categories corresponding to industries or sector such as( primary, secondary and tertiary) in this method the problem of multiple counting or double counting is normally encountered ; so the concept of “value added” was introduced which is the difference between output value and input value at each stage of production. In short words product method measure national output called the gross domestic products(GDP) in terms of value added by each of the sector in the economy.
2.The income method ; this measures the income generated by production. It can be divided into various categories ; (a) The stock appreciation ( the valuation of stocks or goods produced but not sold the same year).
( b) depreciation or capital consumption allowance ; it represents that part of value output which is not earned by any factor of the economy but is the value of capital used up in the process of production .
(c) Transferred income : incomes that are not payment for a services rendered such as unemployment benefit, widows benefit etc.
(d) disposable income factor ; income usually recorded as gross ( ie before taxes are paid ) because it is the measure of the factor contributions to output.
(e) Net factor ( property) ie income from abroad.
(f) stock adjustment and capital gains and losses.
3. The expenditure method : in this side the national income is calculated by adding up the flows of expenses needed to purchase the nations output, while estimating the value of national product by expenditure method we must only record final expenditure excluding the expenditure on intermediate goods and services, The total final expenditure is( TFE) is divided into four broad categories. (a) consumption expenditure ( purchases by house hold ,of currently produced goods and services)..
(b) investment ; expenditure on currently produced capital goods eg plants ,equipment ,stocks etc
(c) Government expenditure ; the spendings made by the government .
(d) Export and import ; export (expenses on domestic output) import ( consumer expenditure on foreign goods ).

Name: Anigbo Esther Chisom
Reg no: 2020/243974
Dept: pure and industrial chemistry
1. The Product Method:
In this method, all goods and services produced during the year in various industries are added up. This is also known as value-added to GDP or GDP at the sector of origin’s cost factor. India includes the following items: agriculture and allied services; mining; development, construction, the supply of electricity, gas, and water, transport, communication, and trade; banking and insurance; real estate and property ownership of residential and commercial services and public administration and defence and other services (or government services). It is, in other words, the amount of the added gross value.
2.The Income Method:
In a nation that produces GDP during a year, people earn income from their jobs. Thus the sum of all factor incomes is GDP by revenue method: wages and salaries (employee compensation) + rent + interest + benefit.
3.Expenditure Method:
This approach focuses on products and services generated during one year within the region.
GDP is subtracted from the portion of consumption, investment, and government spending expended on imports. Likewise, all manufactured components, such as raw materials used in the manufacture of products for sale, are also exempt.
Thus GDP by expenditure method at market prices is net export, which can be positive or negative.

Name: Onwuzurike Oluchi Loveline
Department: Pure and industrial chemistry
Reg no: 2020/245302

National income of a country can be measured by three alternative methods namely:
1)Product method
2)Income method and
3)Expenditure method

1) Product method: In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refers to those goods which are directly consumed and not used in further production process. Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income, otherwise there will be problem of double counting of value of goods. To avoid the problem of double counting we can use the value addition method in which not the whole value of a commodity but value addition ( ie value of final goods, value of intermediate goods) at each stage of production is calculated and these are summed up to arrive at GDP.

2) Income method: Under this method, national income is measured as a flow of factor income. There are generally four factors of production, labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land get rent and entrepreneurship gets profit as their remuneration. Besides, there are some self employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum total of all these factor income is called National Domestic Product (NDP) at factor costs.

3). Expenditure method: In this method, national income is measured as a flow of expenditure from government consumption, net exports and gross capital formation.
The formula is:
National income = C+G+I+NX. Where
C = household consumption
G = government expenditures
I = investment expenditure and
NX = net exports.

Name: Okeke Ebere Florence
Reg No: 2020/243487
Department: Pure and Industrial Chemistry
METHODS OF NATIONAL INCOME
1. Product(Output) method
2. Income method
3. Expenditure method
EXPLANATION
1. Product method: The product method is based on returns made by firms and public corporations concerning the annual value of their output. National income is measured by calculating the total value of goods and services produced in the country during the year.
In India, a full census is taken every 10 years and sample censuses are taken in the intermediate years. Additional information may now be obtained from returns with respect to sales tax/or excise duty.
The money value of goods and services produced in an economy in accounting year is called GROSS NATIONAL PRODUCT(GNP) which is defined my J. R. Hicks as “the collection of goods and services reduced to common basis by being measured in terms of money”.
The output can be into certain categories namely; Primary sector, secondary sector and tertiary sector.
Output product has a major problem which is problem of double counting.

2. Income Method: The second approach is to measure income generated by production.
MAIN ITEMS OF INCOME
a. Income from employment which includes wages and salaries
b. Income of self- employed persons which includes both wages and return on capital owned by self employed persons(who are treated as forms by microeconomics)
c. Rents of land, buildings plus royalties earned from patents and copyrights
d. Return on capital to the private sector
e. Return to capital to the public sector etc

3. Expenditure Method: From the expenditure side, national income is calculated by adding up the flows of expenditure needed to purchase the nation’s output. However, while estimating the value of national product by expenditure method, we must only record final expenditures and exclude all the expenditure on intermediate goods and services.
While measuring national income, TOTAL FINAL EXPENDITURE (TFE) is divided into four broad categories; consumption, investment, government expenditure ( spending), exports and imports.
VARIOUS MEASUREMENT PROBLEMS CROP UP IN PRACTICE OF EXPENDITURE METHOD
a. Price level changes
b. Public goods
c. Self- supplied goods and services
d. Underground Economy
e. Double counting
f. Factor cost etc

Attah Blessing Oluomachi
2020/243514
oluomachi.attah.243514@unn.edu.ng
Pure and Industrial chemistry

1. Product method
2. Income method
3. Expenditure method

Product Method
In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.
In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.
To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP.
The money value is calculated at market prices so sum-total is the GDP at market prices. GDP at market price can be converted into by methods discussed earlier.

Income Method
Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration. Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.

Expenditure Method
In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

THE PRODUCT METHOD:
In this method, all goods and services produced during the year in various industries are added up. This is also known as value-added to GDP or GDP at the sector of origin’s cost factor. India includes the following items: agriculture and allied services; mining; development, construction, the supply of electricity, gas, and water, transport, communication, and trade; banking and insurance; real estate and property ownership of residential and commercial services and public administration and defence and other services (or government services). It is, in other words, the amount of the added gross
. THE INCOME METHOD:
:In a nation that produces GDP during a year, people earn income from their jobs. Thus the sum of all factor incomes is GDP by revenue method: wages and salaries (employee compensation) + rent + interest + benefit.
EXPENDITURE METHOD:
This approach focuses on products and services generated during one year within the region.GDP is subtracted from the portion of consumption, investment, and government spending expended on imports. Likewise, all manufactured components, such as raw materials used in the manufacture of products for sale, are also exempt.Thus GDP by expenditure method at market prices is net export, which can be positive or negative.

Nnadi Jenevine Ifebuche
2020/249840

There are three methods for measuring the national income:
1.Product method
2.Income method
3.Expenditure method
(i) Product method:Here income is measured as a flow of goods and services.The money for all final goods and services produced in an economy is calculated during a year.
(ii) Income Method: Here income is measured as a flow of factor income. The four factors of production:labour, capital,land and entrepreneurship get their reward thus:
Labour-wages
Capital-interest
Land-rent
Entrepreneurship-profit
While those who employ their own labour and capital eg Doctors their income is called mixed income. Sum total of all those factors income is called NDP(net domestic product)at factor costs.
(iii) Expenditure method: Income here is measured as a flow of expenditure.GDP(gross domestic product) is sum total of private consumption expenditure.

Your Article Library
3 Important Methods for Measuring National Income

The national income of a country can be measured by three alternative methods: (i) Product Method (ii) Income Method, and (iii) Expenditure Method.

1. Product Method:

In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.

National income

Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.

To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP.

The money value is calculated at market prices so sum-total is the GDP at market prices. GDP at market price can be converted into by methods discussed earlier.

2. Income Method:

Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.

Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.

3. Expenditure Method:

In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

Name—Anolue Ugochi Sylvia
Reg no- 2020/244142
Department- pure and industrial chemistry

1. The product (output) method
2. The income method
3. The expenditure method

1 Product method: under this method, we add the values of output produced or services rendered by the different sectors of the economy during the year inorder to calculate national income.
In this method,we include only the value added by each firm in the production process in the output figure. Hence we use value added method.The value added output of all the sectors of the economy is the GNP at facter cost.
However, this method is unscientific as it adds the value of only those goods and services that are sold in the market.

2. Income method: under this method, we add all the incomes from employment and ownership of assets before taxation received from all the production activities in an economy. Thus,it is also the factor income method .we also need to add the undistributed profits of the private sector and the trading surplus of the public sector cooperations.
However we need to exclude items not arising from productive activities such as sickness benefits, interest on national debt etc

3. Expenditure method: This method measures the total domestic expenditure of the economy, it consists of two elements, i.e consumption and investment expenditure.
Consumption expenditure include consumption expenditure of the house hold sector on goods and services and consumption outlay of the business sector and public authorities.
Investment expenditure refers to the expenditure on the making of fixed capital such as plant and machinery buildings etc.

There are Three methods of measuring national income
1) product method
2) Income method
3) Expenditure method
1) product method: In this method, we add the values of output produced or services rendered by the different sectors of the economy during the year in order to calculate the National Income of the country.In this method, we include only the value added by each firm in the production process in the output figure
2) Income method: It is also called factor income method. In this method, we add all the incomes from ownership of assets and employment before taxation received from all the production activities in an economy.We also need to add the undistributed profits of the private sector and the trading surplus of the public sector corporations.
However, we need to exclude items not arising from productive activities such as sickness benefits, interest on the national debt, etc.
3) Expenditure method: In this method measures the total domestic expenditure of the economy. It consists of two elements, which are.
a) Consumption expenditure and
b) Investment expenditure.
a) Consumption expenditure includes consumption expenditure of the household sector on goods and services and consumption outlays of the business sector and public authorities.
b) Investment expenditure refers to the expenditure on the making of fixed capital such as Plant and Machinery, buildings, etc.

Chukwu kelvin chimobi
Pure and industrial chemistry
2020/242217

There are three ways of measuring national income which are
1) product method
2) income method
3) Expenditure method
1) product method: In this method, we add the values of output produced or services rendered by the different sectors of the economy during the year in order to calculate the National Income of the country.
In this method, we include only the value added by each firm in the production process in the output figure

2) income method: it is also called the factor method in this method, we add all the incomes from ownership of assets and employment before taxation received from all the production activities in an economy.
We also need to add the undistributed profits of the private sector and the trading surplus of the public sector corporations.However, we need to exclude items not arising from productive activities such as sickness benefits, interest on the national debt, etc.
3) Expenditure method: In these method the total domestic expenditure of the economy is measured. It consists of two elements, which are a) Consumption expenditure and
b) Investment expenditure.
a) Consumption expenditure includes consumption expenditure of the household sector on goods and services and consumption outlays of the business sector and public authorities.
b) Investment expenditure refers to the expenditure on the making of fixed capital such as Plant and Machinery,

FOUR METHODS OF MEASURING NATIONAL INCOME:

THE PRODUCT METHOD: In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.

Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods

The money value is calculated at market prices so sum-total is the GDP at market prices. GDP at market price can be converted into by methods discussed earlier.

2. THE INCOME METHOD: Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.

3. EXPENDITURE METHOD: In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.

THE VALUE ADDED METHOD: Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.

To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP.

Chukwu Victor Obinna
2020/241459
Chukwuvictor120@gmail.com

The national income of a country is the net money value of all service and goods made by citizens in a year.

This National income of a country can be alculatd using this three methods

• Total Production Method
In this method the net output of the various sectors and companies in the economy is added up the get a value of the nations production. The problem to this approach is something called the double counting ,this occurs because in a thrive economy a companies output can also be another’s input.
• Total Income Method
This method is link to the production of the country in which the income generated by production is summed up which include revenue from rent,salaries,wages.
• Total Expenditure Method
In this method the expenditure that is the cost required for product,maintenance of life,investments and government spendings are subtracted for the avalaible funds to find the national income of the country.

1-Gross National income: it is total domestic and foreign outputclaimed by residents of a country consisting of gross domestic product plus factor incomes earned by foreign residents minus income earned in the domestic economy by no residents. For most nation’s there is little difference between GDP and GNI.
To compact nation’s GDP to GNI 3 terms needs to be added to the former
A- Net compensation receipts b-Net property income c- Net taxes receivable on production and import
2-Gross national output: it is the total quantity of the total input processed with the use of a production techniques and factors of production.
C-Gross national expenditure: it is the spending on the goods and services which a country made which are considered necessary at that point in to.e of purchase. Examples of nation expenditure buying of weapon machinery payment for labor import expenses on social amenities
When all this are put in place the nation’s income can be calculated

METHODS OF MEASURING NATIONAL INCOME INCLUDE:

1.The product method
2.The income method
3.Thank expenditure method
4. The value added method

PRODUCT METHOD: to this method, the total value of final goods and services produced in a country during a year is calculated at market prices. To find out the GNP, the data of all productive activities, such as agricultural products, wood received from forests, minerals received from mines, commodities produced by industries, the contributions to production made by transport, communications, insurance companies, lawyers, doctors, teachers, etc. are collected and assessed at market prices. Only the final goods and services are included and the intermediary goods and services are left out. 

(2) Income Method:
According to this method, the net income payments received by all citizens of a country in a particular year are added up, i.e., net incomes that accrue to all factors of production by way of net rents, net wages, net interest and net profits are all added together but incomes received in the form of transfer payments are not included in it. The data pertaining to income are obtained from different sources, for instance, from income tax department in respect of high income groups and in case of workers from their wage bills. 

(3) Expenditure Method:
According to this method, the total expenditure incurred by the society in a particular year is added together and includes personal consumption expenditure, net domestic investment, government expenditure on goods and services, and net foreign investment. This concept is based on the assumption that national income equals national expenditure. 

(4) Value Added Method:
Another method of measuring national income is the value added by industries. The difference between the value of material outputs and inputs at each stage of production is the value added. If all such differences are added up for all industries in the economy, we arrive at the gross domestic product. 

Eze Jane Ogechi
2020/244414
Pure and industrial chemistry

The national income of a country can be measured by three alternative methods: (i) Product Method (ii) Income Method, and (iii) Expenditure Method:

(1) product method —In this method national income can be measured as a flow of goods and services during a year

2. Income Method:

Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.

(3) Expenditure Method:

In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

Name: Ezeme Lilian ifeoma
Department :Economics
Reg no:2020/249501

The three methods for measuring national income are:
1. The output Method( value added method)
2. The Income Method
3. The Expenditure Method.

1. The output Method:This can also be known as value added method.
The most direct method of arriving at an estimate of a country’s national output or income is to add the output figures of all firms in the economy to get the total value of the nation’s output.
There is a major problem of this product method known as the problem of double counting. It arises due to the fact that the industry’s output is often the input of another industry.
This problem is avoided by using the concept of ‘value added’, which is the difference between output value and input at each stage of production.

In other words, each firm’s value added is the value of its output minus the value of the inputs that it purchases from other firm.
Th output approach measures national output called gross domestic products (GDP) in terms of the values added by each of the sectors of the economy. To avoid the problem of double or multiple counting we must either use the value added method or count the total value of all final products.

2. The Income Method:
The second approach is to measure incomes generated by production which includes wages and salaries, Income of self-employed persons ) , rent of land plus royalties earned from patents and copyrights. Thus, it is a partly of return to land and partly a return to capital.

When we use the income method we have to exclude all transfer incomes such as unemployment benefit, widow pension, child benefits or even interest on government bonds. These are transfer incomes since they are not payments for services rendered — there is no contribution to current real output by the recipient.

Thus, while using the income method we must only take into account those which have been earned for services rendered and in respect of which there is some corresponding value of output. Interest paid on government bonds is to be excluded for a simple reason.

The government imposes taxes on some people to pay interest to others. But, the total output (or income) of society does not increase in the process. We may also refer to private transfer in this context. If you receive a gift from your father who is also a resident of India, India’s national income will remain unchanged.

Factor incomes are normally recorded gross (i.e., before taxes are paid), because this is the measure of the factors’ contribution to output. If we subtract all direct taxes as also provident funds contributions and interest paid by individuals on loans (say to HDFC or to Citi Bank credit cards) from national income we arrive at disposable income. It is so called because people can dispose it off as they wish.
. All the income generated in production does not find its way into personal incomes. A certain portion of company profit is added to reserves (and not distributed as dividends among shareholders

It is also to be noted that some of the income derived from economic activity within the country will be paid to foreign owners of assets located in Cameroon, while income from Cameroon-owned assets abroad will be moving in the opposite direction. The income account, therefore, must be adjusted by including the item ‘net income from abroad.

Finally, stock appreciation adjustment has to be made in order to eliminate the element of windfall gain in the profits received. Similarly, capital gains and losses are to be excluded from national income to avoid double count­ing
It will is calculated as: wages+salaries+rent+interest+profit

3. The Expenditure Method:
National income is calculated by adding up the flows of expenditure needed to purchase the nation’s output. In expenditure method,you add the expenditure of all the economic unit which are household, Government, firms and external sectors.
However, while estimating the value of national product by the expenditure method we must only record final expenditures.

We have to exclude all the expen­diture on intermediate goods and services. While measuring national in­come total final expenditures.
Consumption expenditure refers to all purchases by households of cur­rently produced goods and services, except new houses which are counted as investment. Secondly, consumption of second hand goods like used cars is to be excluded to avoid double counting. Thirdly, we have to measure purchases of goods and services made in a year. We need not measure their actual consumption that occurs during the year (or any other period under considerations.
It is measured as: C+I+G+(X-M)

REG .NO : 2020/245116
Name: UGWUADA BLESSING CHIGOZIE
DEPT: PURE AND INDUSTRIAL CHEMISTRY

There are four difference methods of measuring national income. And it depends on the country availability of datas and the purpose in hand. 
Will determine the method you will use
1 . Product method
2. Income method
3. Expenditure method
4. Value added method

1. PRODUCT METHOD:
In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.
Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.
To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP
In Other to determine the GNP, the data of all productive activities, such as agricultural products, wood received from forests, minerals received from mines, commodities produced by industries, the contributions to production made by transport, etc, are to be collected and assessed at market prices.

2. INCOME METHOD: Under this method,
the net income payments received by all citizens of a country in a particular year are added up.
National income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.
Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.

3. EXPENDITURE METHOD: In this method,
total expenditure incurred by the society in a particular year is added together and includes personal consumption, GDP. And GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import)

4. VALUE ADDED METHOD: Another method of measuring national income is the value added by industries. The difference between the value of material outputs and inputs at each stage of production is the value added. If all such differences are added up for all industries in the economy, we arrive at the gross domestic product.

Gross Domestic Product
The total value of output in an economy is the Gross Domestic Product (GDP) and is used to measure economic activity changes. GDP encompasses the production of foreign-owned enterprises located in a country following the foreign direct investment.

There are three different ways to calculate GDP that should all add up to the same amount: The national output is equal to national expenditure (Aggregate demand) which in turn is equal to national income.

The equation for GDP using this approach is
GDP = C(Household spending) + I(Capital investment spending) + G(Government spending) + (X(Exports of Goods and Services)-M(Imports of Goods and Services)
The three different ways to measure GDP are – Product Method, Income Method, and Expenditure Method.

These three calculating GDP methods yield the same result because National Product = National Income = National Expenditure.
1. The Product Method:
In this method, all goods and services produced during the year in various industries are added up. This is also known as value-added to GDP or GDP at the sector of origin’s cost factor. India includes the following items: agriculture and allied services; mining; development, construction, the supply of electricity, gas, and water, transport, communication, and trade; banking and insurance; real estate and property ownership of residential and commercial services and public administration and defence and other services (or government services). It is, in other words, the amount of the added gross value.

2. The Income Method:
In a nation that produces GDP during a year, people earn income from their jobs. Thus the sum of all factor incomes is GDP by revenue method: wages and salaries (employee compensation) + rent + interest + benefit.
3. Expenditure Method:
This approach focuses on products and services generated during one year within the region.

GDP is subtracted from the portion of consumption, investment, and government spending expended on imports. Likewise, all manufactured components, such as raw materials used in the manufacture of products for sale, are also exempt.
Thus GDP by expenditure method at market prices is net export, which can be positive or negative.

Didiugwu Cynthia Nmasichukwu
2019/250235
Science laboratory technology

Method of measuring National Income
There are three ways of measuring the National Income of a country. They are from the income side, the output side and the expenditure side. Thus, we can classify these perspectives into the following methods of measurement of National Income.

1: production

In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.

Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.

To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP.

The money value is calculated at market prices so sum-total is the GDP at market prices. GDP at market price can be converted into by methods discussed earlier.

2. Income Method:

Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.

Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.

3. Expenditure Method:

In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

Gross Domestic ProductThe total value of output in an economy is the Gross Domestic Product (GDP) and is used to measure economic activity changes. GDP encompasses the production of foreign-owned enterprises located in a country following the foreign direct investment. There are three different ways to calculate GDP that should all add up to the same amount: The national output is equal to national expenditure (Aggregate demand) which in turn is equal to national income. The equation for GDP using this approach is GDP = C(Household spending) + I(Capital investment spending) + G(Government spending) + (X(Exports of Goods and Services)-M(Imports of Goods and Services)The three different ways to measure GDP are – Product Method, Income Method, and Expenditure Method.These three calculating GDP methods yield the same result because National Product = National Income = National Expenditure.1. The Product Method:In this method, all goods and services produced during the year in various industries are added up. This is also known as value-added to GDP or GDP at the sector of origin’s cost factor. India includes the following items: agriculture and allied services; mining; development, construction, the supply of electricity, gas, and water, transport, communication, and trade; banking and insurance; real estate and property ownership of residential and commercial services and public administration and defence and other services (or government services). It is, in other words, the amount of the added gross value.2. The Income Method:In a nation that produces GDP during a year, people earn income from their jobs. Thus the sum of all factor incomes is GDP by revenue method: wages and salaries (employee compensation) + rent + interest + benefit.3. Expenditure Method:This approach focuses on products and services generated during one year within the region.GDP is subtracted from the portion of consumption, investment, and government spending expended on imports. Likewise, all manufactured components, such as raw materials used in the manufacture of products for sale, are also exempt.Thus GDP by expenditure method at market prices is net export, which can be positive or negative.1. GDP at Factor Cost:GDP is the amount of net value added by all producers within the country at the cost factor. Since the net value added is allocated as revenue to the owners of production factors, the sum of domestic factor incomes and fixed capital consumption is GDP (or depreciation).Thus, GDP at Factor Cost is equal to the sum of  Net value added and Depreciation.GDP at factor cost includes -Compensation of employees, i.e., wages, salaries, etc.Operational surplus, which is both incorporated and unincorporated companies’ business profit. Mixed-Income of Self- employed.Conceptually, GDP at the cost factor and GDP at the market price must be equivalent since the cost factor (payments to factors) of the products produced must be equal to the final value at market prices of the goods and services. The retail value of products and services, however, varies from the earnings of the output factors.2. Net Domestic Product (NDP):The NDP is the value of the economy’s net production throughout the year. During the manufacturing process, some of the country’s capital equipment wears out or becomes redundant each year. A certain percentage of the gross expenditure removed from GDP is the amount of this capital consumption. Net Domestic Product = GDP at the expense of Factor – Depreciation3. Nominal and Real GDP:It is referred to as GDP at current prices or nominal GDP when GDP is calculated based on the current price. On the other hand, if GDP is measured in a given year based on fixed costs, it is referred to as GDP at constant prices, or actual GDP.Nominal GDP is the value of the goods and services produced in a year, calculated at the current market) prices in terms of rupees (money). 

There are three ways of measuring the National Income of a country. They are from the income side, the output side and the expenditure side. Thus, we can classify these perspectives into the following methods of measurement of National Income.
Methods of Measuring National Income
Product Method
Income Method
Expenditure Method

1. Product Method
Under this method, we add the values of output produced or services rendered by the different sectors of the economy during the year in order to calculate the National Income.
The outputs can be grouped into certain product categories corresponding to industries or to sectors (such as the primary sector, secondary sector and the tertiary sector).
In this method, we include only the value added by each firm in the production process in the output figure.
Hence, we use the value-added method. The value-added output of all the sectors of the economy is the GNP at factor cost.
However, this method is unscientific as it adds the value of only those goods and services that are sold in the market or are available for sale in the market
When we use the output approach, one major problem arises. This is known as the problem of double counting. It arises due to the fact that the industry’s output is often the input of another industry. This is why when we add up the values of all sales, the same output is counted again and again as it is sold by one firm to another. This problem is avoided by using the concept of ‘value added’, which is the difference between output value and input at each stage of production.
In other words, each firm’s value added is the value of its output minus the value of the inputs that it purchases from other firms. Thus, an automobile manufacturing company’s value added is the value of its output (i.e., the market value of cars) minus the value of tyres and tubes, glass, steel batteries it buys from other firms as also the values of any other inputs, such as electricity and fuel oil that it purchases from other firms.While referring to the concept of value added economists draw a distinc­tion between intermediate goods (like tyres and types which are used as inputs into a further stage of production) and final goods that are the outputs of the economy after eliminating all double (multiple) counting and are used for consumption and not for further production.
In our example, tyres and tubes, glass, steel, electricity were all intermediate goods used at various stages in the production process while cars were final goods. In fact, all investment products used at various stages in the process lead to the final produce, car.In short, the output approach measures national output called gross domestic products (GDP) in terms of the values added by each of the sectors of the economy. To avoid the problem of double or multiple counting we must either use the value added method or count the total value of all final products.If we use the value added method of estimating national output, we have to include exports but exclude imported materials and services. Imports are automatically excluded since we only record the values added in this country. This will give us the GDP. In general, the GDP is measured at market prices, giving the market value of all output. To this, we must add (or from this we must subtract) the net factor property.
2. Income Method
Under this method, we add all the incomes from employment and ownership of assets before taxation received from all the production activities in an economy.
income approach measures GDP “in terms of the factor-in- come claims generated in the course of producing the total output.”Thus, it is also the Factor Income method. We also need to add the undistributed profits of the private sector and the trading surplus of the public sector corporations.In a year of inflation, it is necessary to make an adjustment for the purely monetary changes in the value of stocks. It is so because a rise in prices increases the value of existing stocks even when there is no change in their volume.
However, we need to exclude items not arising from productive activities such as sickness benefits, interest on the national debt, etc.When we use the income method we have to exclude all transfer incomes such as unemployment benefit, widow pension, child benefits or even interest on government bonds. These are transfer incomes since they are not payments for services rendered — there is no contribution to current real output by the recipients.National income is not the sum of all personal incomes. The reason is simple. All the income generated in production does not find its way into personal incomes. A certain portion of company profit is added to reserves (and not distributed as dividends among shareholders). Likewise, the profits of public sector (state) enterprises are appropriated by the government and not by persons. But, these undistributed surpluses must be added on to the total of factor incomes received by persons to arrive at national income.
3. Expenditure Method
This method measures the total domestic expenditure of the economy. It consists of two elements, viz. Consumption expenditure and Investment expenditure.

Consumption expenditure includes consumption expenditure of the household sector on goods and services and consumption outlays of the business sector and public authorities.
Consumption expenditure refers to all purchases by households of cur­rently produced goods and services, except new houses which are counted as investment. Secondly, consumption of second hand goods like used cars is to be excluded to avoid double counting. Thirdly, we have to measure purchases of goods and services made in a year. We need not measure their actual consumption that occurs during the year (or any other period under consideration).
Investment expenditure refers to the expenditure on the making of fixed capital such as Plant and Machinery, buildings, etc.Investment is expenditure on currently produced capital goods like plant and equipment and housing. Stocks are also included. Investment may be gross or net. Gross investment less depreciation is net investment, or net addition to (purchase of) society’s stock of capital.Money that government spends falls into two categories, one is called transfer payments. These are money paid out for which nothing is given back to the government. One good example is pension paid to retired people. There is a sort of transfer of money from tax-payers to the people receiving pensions.

NAME: Ezeh Ginika Noeline
DEPT: Pure and Industrial Chemistry
REG.NO:2020/241827
The national income of a country can be measured by three alternative methods;
(i) product method
(ii) Income method
(iii) Expenditure method
1. Product method: National income is measured as a flow of goods and services. Where money value used for final goods and services produced in an economy during a year is calculated. Final goods are those goods that are directly consumed and not further processed. To avoid the problem of double counting we can use the value addition method in which not the whole value of a commodity but value at each stage of production is calculated to arrive at GDP.

2. Income method: This method attains that national income is measured as a flow of factor increase. There are generally four factors of production labour, capital, land and entrepreneur. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets payment as their renumeration. Persons who employ their own labour earn a mixed income.

3. Expenditure method: In this method, national income is measured as a flow of Expenditure. GDP is sum total of private consumption expenditure. Government consumption expenditure, Gross capital format (Government and private) and net export (export_ import).

Name: Nnamani Ronald Chinedu.
Faculty: Social science.
Department: Philosophy.
Reg number: 2020/243123.
Email: nnamanironaldchinedu@gmail.com.

Ways to measure national income:
1. Product method
2. Income method.
3. Expenditure method.

a. Product method: In this method all the goods and services produced are added together. National income can be measured through this method using the flow of goods and services.

b. Income method: Income method measures national income from the factors of production. All the primary factors of production like wages, rent, interest and profit are added together.

c. Expenditure method: This method, national income can be measured via the flow of expenditures. This method calculates Gross Domestic Product (GDP) that combines consumption, investment, government spending, net exports. GDP = Consumption + Investment + Government spending + Net Exports.

Methods of measuring national income
1) product method
2) income method
3) expenditure method
4) value added method
Explanation
1) product method: in this method the total value of final goods and services produced in a country during a year is calculated at market prices. To find the GNP, the data of all productive activities, such as agricultural products are collected and assessed at market prices
2) income method: this method the net income payment received by all citizens of a country in a particular year are added up get the national income.
3) Expenditure method: this method the total expenditure incurred by the society in a particular year is added together and includes personal consumption expenditure, net domestic investment etc this concept is based on the assumption that national income equals national expenditure.
4) value added method: this method talks about the difference between the value of material outputs and inputs at each stage of production.

NAME: ODOH MMESOMA JESSICA
REG NUMBER: 202/242893
DEPARTMENT: COMBINED SOCIAL SCIENCES( ECONOMICS/PHILOSOPHY)

NATIONAL INCOME
National Income is the monetary value of the total volume of goods and services produced or total income ( wages, profits, interest, rents), earned during a given period of time usually one year.
It also refers to the measurement of income and production or level of economic activity at a particular time.
METHODS OF MEASURING NATIONAL
INCOME
Basically, there are three methods of measuring national income, these are;
(1) INCOME METHOD/APPROACH
It measures all incomes earned by the various factors of production over a specified period. Such incomes to be added includes wages and salaries, rent, profit, interest e.t.c. It measures the national income as Factor Cost. Thus, the total income is called Gross Domestic Product (G.D.P)
at factor cost. To avoid double counting, transfer payment, scholarships, grants, social security benefits and gifts are not included.

(2) OUTPUT METHOD /APPROACH:
It measures the monetary value of all final goods and services produced in a country by individuals, firms and government over a specific period. To avoid double counting, the figures are collected with the basis of value added. Value added implied value of output less the cost of input. Hence, national income is measures by adding together the value of the net contributions of the various sectors.

(3) EXPENDITURE METHOD/APPROACH:
It calculates the total amount spent on consumption and investment purposes over a specified period of time. In other words, it measures the total expenses on currently produced final goods and services by the individuals or households, firms and government plus net export. Transfer payment are excluded.

Ugwu Francisca Nkechinyerem
2019/249312
Science laboratory technology

Methods for Measuring National Income

The following points highlight the three methods for measuring national income. The methods are: 1. The Product (Output) Method 2. The Income Method 3. The Expenditure Method.

1. The Product (Output) Method:
The most direct method of arriving at an estimate of a country’s national output or income is to add the output figures of all firms in the economy to get the total value of the nation’s output. The outputs can be grouped into certain product categories corresponding to industries or to sectors (such as the primary sector, secondary sector and the tertiary sector).

GDP and GNP of a Hypothetical Economy

Problems:

When we use the output approach, one major problem arises. This is known as the problem of double counting. It arises due to the fact that the industry’s output is often the input of another industry. This is why when we add up the values of all sales, the same output is counted again and again as it is sold by one firm to another. This problem is avoided by using the concept of ‘value added’, which is the difference between output value and input at each stage of production.

In other words, each firm’s value added is the value of its output minus the value of the inputs that it purchases from other firms. Thus, an automobile manufacturing company’s value added is the value of its output (i.e., the market value of cars) minus the value of tyres and tubes, glass, steel batteries it buys from other firms as also the values of any other inputs, such as electricity and fuel oil that it purchases from other firms.

As Lipsey has put it, “A firm’s output is defined as its value added; the sum of all values added must be the value, at factor cost, of all goods and services produced by the economy”

While referring to the concept of value added economists draw a distinc­tion between intermediate goods (like tyres and types which are used as inputs into a further stage of production) and final goods that are the outputs of the economy after eliminating all double (multiple) counting and are used for consumption and not for further production.

In our example, tyres and tubes, glass, steel, electricity were all intermediate goods used at various stages in the production process while cars were final goods. In fact, all investment products used at various stages in the process lead to the final produce, car.

In short, the output approach measures national output called gross domestic products (GDP) in terms of the values added by each of the sectors of the economy. To avoid the problem of double or multiple counting we must either use the value added method or count the total value of all final products.

If we use the value added method of estimating national output, we have to include exports but exclude imported materials and services. Imports are automatically excluded since we only record the values added in this country. This will give us the GDP. In general, the GDP is measured at market prices, giving the market value of all output. To this, we must add (or from this we must subtract) the net factor property.

What is the gross national product? GNP is the name we give to the total rupee value of the final goods and services produced within a nation during a given year. It is the figure one arrives at when one applies the measuring rod of money to the diverse goods and services—from computer games to machine tools—that a country produces with its land, labour, and capital resources and it equals the sum of the money values of all consumption and investment goods, government purchases, and net exports to other coun­tries.

GNP is used for various purposes, but the most important one is to measure the overall performance of an economy.

The gross domestic product (or GDP) is the most comprehensive measure of a nation’s total output of goods and services. It is the sum of the dollar values of consumption, gross investment, government purchases of goods and services, and net exports produced within a nation during a given year.

2. The Income Method:
The second approach is to measure incomes generated by production. The main items of income are shown in Table 1.

Income from employment (item no. 1 in the Table) is wages and salaries. Income of self-employed persons (item number 2) includes both wages and return on capital owned by self-employed persons (who are treated as firms in microeconomics). Item number 3 is to be interpreted in a broad sense. It includes not only the rent of land but also the rent of buildings, plus royalties earned from patents and copyrights. Thus, it is a partly of return to land and partly a return to capital. Item number 4 is the major part of return on capital to the private sector.

Likewise, item number 5 is the major part of the return to capital for the public sector. Item number 6 is depreciation which is the reduction in the value of capital goods due to their contribution to the production process. Depreciation or capital consumption allowance represents that part of the value of output which is not earned by any factor but is the value of capital used up in the process of production. This depreciation is to be treated as part of the gross return on capital.

Item number 8 involves stocks and its appreciation. The first one is concerned with the valuation of stock of goods produced but not sold in the same year. These are valued at market prices. This creates a problem in the sense that there is need to record as part of current output (and income) the profits that will be received by the firm only when, and if at all, the goods are sold. Thus, if aggregate inventories of Indian compa­nies go down, national income will raise.

In a year of inflation, it is necessary to make an adjustment for the purely monetary changes in the value of stocks. It is so because a rise in prices increases the value of existing stocks even when there is no change in their volume. As G.F. Stanlake has put it, “In order to obtain an estimate of the real changes in stocks it is necessary to make a deduction equal to the ‘inflationary’ increase in value.”

This deduction is treated as stock apprecia­tion in the national income tables (see Table 1). Thus, in order to avoid distortions caused by stock appreciation in an inflationary period, a correc­tion has to be made to eliminate changes in the value of stocks due to price changes alone.

As Lipsey has put it, changes in stocks only contribute to changes in GDP when their physical quantities change. The correction for the change in the value of existing stocks yields GDP, valued at factor cost and calculated from the income side of the economy.

Equivalance of National output, income and expenditure

In short, the income approach measures GDP “in terms of the factor-in- come claims generated in the course of producing the total output.”

Transfer Income:

When we use the income method we have to exclude all transfer incomes such as unemployment benefit, widow pension, child benefits or even interest on government bonds. These are transfer incomes since they are not payments for services rendered — there is no contribution to current real output by the recipients.

Thus, while using the income method we must only take into account those which have been earned for services rendered and in respect of which there is some corresponding value of output. Interest paid on government bonds is to be excluded for a simple reason.

The government imposes taxes on some people to pay interest to others. But, the total output (or income) of society does not increase in the process. We may also refer to private transfer in this context. If you receive a gift from your father who is also a resident of India, India’s national income will remain unchanged.

Factor incomes are normally recorded gross (i.e., before taxes are paid), because this is the measure of the factors’ contribution to output. If we subtract all direct taxes as also provident funds contributions and interest paid by individuals on loans (say to HDFC or to Citi Bank credit cards) from national income we arrive at disposable income. It is so called because people can dispose it off as they wish.

Personal Incomes:

National income is not the sum of all personal incomes. The reason is simple. All the income generated in production does not find its way into personal incomes. A certain portion of company profit is added to reserves (and not distributed as dividends among shareholders). Likewise, the profits of public sector (state) enterprises are appropriated by the government and not by persons. But, these undistributed surpluses must be added on to the total of factor incomes received by persons to arrive at national income.

Net Factor (Property) Income from Abroad:

It is also to be noted that some of the income derived from economic activity within the country will be paid to foreign owners of assets located in India, while income from Indian-owned assets abroad will be moving in the opposite direction. The income account, therefore, must be adjusted by including the item ‘net income from abroad’. Thus, if you receive a dividend income $ 1,000 from an U.S. multinational it will be a part of India’s national income.

Stock Adjustment and Capital Gains and Losses:

Finally, stock appreciation adjustment has to be made in order to eliminate the element of windfall gain in the profits received. Similarly, capital gains and losses are to be excluded from national income to avoid double count­ing. Thus, if you sell shores in the stock exchange and make a gain of Rs. 100,000 it will not be a part of India’s national income. However, if a certain portion of it includes factor payment such as broker’s commission it will be a part of national income.

3. The Expenditure Method:
From the expenditure side national income is calculated by adding up the flows of expenditure needed to purchase the nation’s output. However, while estimating the value of national product by the expenditure method we must only record final expenditures.

We have to exclude all the expen­diture on intermediate goods and services. While measuring national in­come total final expenditure (TFE) is divided into four broad categories: consumption, investment, government expenditure (spending), exports and imports. These four components may now be further developed.

Consumption:

Consumption expenditure refers to all purchases by households of cur­rently produced goods and services, except new houses which are counted as investment. Secondly, consumption of second hand goods like used cars is to be excluded to avoid double counting. Thirdly, we have to measure purchases of goods and services made in a year. We need not measure their actual consumption that occurs during the year (or any other period under consideration).

Investment:

Investment is expenditure on currently produced capital goods like plant and equipment and housing. Stocks are also included. Investment may be gross or net. Gross investment less depreciation is net investment, or net addition to (purchase of) society’s stock of capital.

Government Expenditure:

Money that government spends falls into two categories, one is called transfer payments. These are money paid out for which nothing is given back to the government. One good example is pension paid to retired people. There is a sort of transfer of money from tax-payers to the people receiving pensions.

These transfer payments are not part of the GNP, since they do not arise from production. It is government spending for goods and of services that enters the GNP. Thus, the purchase of a wagon for the Railway Board and the wages of postal workers are put of the GNP.

Only government expenditure on currently produced goods and services is to be included. This is known as exhaustive expenditure. All transfer expenditure is to be excluded to avoid double counting. As Lipsey has put it, “All government payments to factors of production in return for factor services rendered or payments for goods and services are counted as part of the GDP.”

Examples are wages and salaries of government employees, government expenditure on goods purchased from farmers for distribution through the public distribution system (ration shops) and on medicines purchased from the private sector for distribution through government hospitals.

Exports and Imports:

Since exports represent foreigners’ expenditure on domestic output these are included in GDP. Likewise imports are domestic consumers’ expenditure on foreign goods. Hence, they are not a part of GDP. In the language of Lipsey, “expenditure approach measures the GDP in terms of the categories of expenditure required to purchase the total output of society”.

Market Price Measure Vs. Factor Cost Measure:

National expenditure is measured at market prices. These prices differ from the factor cost values by the amount of taxes and subsidies they contain. Thus, national income at market price-indirect taxes + subsidies = national income at factor cost.

National Income at Market Price and National Income at factor cost

Residual Error:

All these measures of national income are supposed to give the same final figure. Any discrepancy among the three measures is due to statistical error. This is known as rounding-up error or residual error, i.e., the error of calculation (not due to any conceptual or methodological problem).

Problems:

However, various measurement problems crop up in practice.

These are the following:

1. Price Level Changes:

Firstly, price level changes create complications. Such changes make it difficult to compare the value of output in one year with that of another year. Do we express statistics in terms of market prices or constant prices?

If in terms of market prices, then figures will be distorted by inflation even though national output may have remained the same. To overcome this, statistics are often expressed in terms of constant prices. This means that a particular year’s prices are chosen to calculate the value of output. In India, for example, 1980-81 is taken as the base year.

2. Public Goods:

Secondly, difficulties arise in case of public goods like road, hospitals, defence, schools, etc., which do have market prices. They are parts of GDP because they satisfy human wants and make use of scarce resources. So, the solution lies in measuring their values ‘at cost’. The salaries of government school teachers and policemen are taken as a meas­ure of the values of their outputs.

The education and health expenditures are included at their cost since they are obviously no different from similar services for which people pay. All government services are therefore included at cost in national output despite the argument that in some instances this could amount to double counting because these services are financed out of people’s taxation.

3. Self-Supplied Goods and Services:

Thirdly, people produce same goods and services for themselves. For example, many teachers teach their own children, farmers produce food for themselves and many people drive their own cars, and many people even make their own clothes. In such cases, it is not possible to arrive at a market measurement of the value of the output.

If identical goods and services are sold in the market place it is possible to give self-provided goods and services an imputed valuation — an estimate of their values can be included in the national income figures. This method is usually used in case of owner-occupied houses (i.e., income from house property).

The market rents of similar properties are used as measuring rod for the imputed rents of premises occupied by their owners. If there is no reliable market indicator, the assumed (imputed) value must be an arbitrary estimate or the national income accountant may decide to omit the commodity (service) from the calculations of the national output. This latter solution is adopted in case of free services rendered by house­wives like coaching their own children, or cooking food or drawing water from the roadside tube-well or even washing clothes.

In short, certain goods and services may be provided by a person for himself or herself and it is very difficult to include these in calculations altogether. Many of these self-supplied goods and services will be omitted from national income. However, an imputed value is given to owner occupied houses and an estimate is made of the value of food consumed by farmers themselves.

Similarly, some goods and services, e.g., services given by housewives, cannot be valued at all and are omitted. However, this creates a difficulty because a housekeeper’s services are calculated in national income.

4. Underground Economy:

Moreover, work done in the ‘Black or Underground Economy’, for which there is no official record, is not included in calculations. This is a serious problem in all market-based economies.

5. Double Counting:

This problem arises because the outputs of some firms are the inputs of other firms. There are two possible ways of tackling this problem. Prima facie, national income can be measured by adding the values of the final products’.

A preferable alternative is to total the values added at each stage of produc­tion. Double counting is a common problem faced by all countries. Transfer payments should not be included in the calculations of GNP. In addition, from the value of the products of industries must be deducted the cost of raw materials and products and services provided by other industries. Only the value added is included. Stock appreciation must also be deducted. This occurs when the value of stocks increases because of inflation. But, it represents no increase in real output.

6. Factor Cost:

The value of the national output is measured at factor cost, that is, in terms of the payments made to the factors of production for services rendered in producing that output. As Stanlake has put it, “Using market prices as measures of the value of output can be misleading when market prices do not accurately reflect the costs of production (including profits)”.

In fact, the market prices of most of the commodities that we buy include indirect taxes and some of them include an element of subsidy. Therefore, if we are to arrive at the factor cost value, we have to deduct taxes on expenditure and add subsidies to the market price valuations. It would be misleading to the figures for national income at market prices since it would mean that the value of national output could be increased by raising the rates of indirect taxes such as sales tax or excise duty.

So, in spite of the supreme importance of the national income estimates, a lot of difficulties arise in calculating national income properly.

The national income of a country can be measured by three alternative methods: (i) Product Method (ii) Income Method, and (iii) Expenditure Method.

1. Product Method:

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In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.

National income
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Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.

To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP.

The money value is calculated at market prices so sum-total is the GDP at market prices. GDP at market price can be converted into by methods discussed earlier.

2. Income Method:

Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.

Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.

3. Expenditure Method:

In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports

Ezea perpetua Ebubechukwu.
2020/243915.

Methods of measuring National income.

The product (output) method: The most direct method of arriving at an estimate of a country’s national output or income is to add the output figures of all firms in the economy to get the total value of the nation’s output.
The outputs can be grouped into certain product categories corresponding to industries or to sector (such as primary sector, secondary sector and the tetiary sector).

The income method : from the side of payments made to the primary factors production in the form of rent, wages, interest and profit for the productive service in an accounting year.

The Expenditure method : From the Expenditure side national income is calculated by adding up the flows of expenditure needed to purchase the nation’s output.
However, while estimating the value of national product by the Expenditure method must only record final Expenditure.

Nechi Andrea Chiamaka
2020 /243129
Philosophy
Social sciences
Methods of measuring the national income
1. The measurement of Gross domestic product:
Gross domestic product (GDP ) is the market value of all the final goods and services produced within a country in a given period of time. GDP uses market prices as market prices reflect the value of different goods and services produced legally in the economy.
There are some items, however that GDP excludes because their measurement is difficult. illegal activities are excluded such as illegal drugs, male and female prostitutions .it excludes most goods and services produced and consumed at home because they never enter the market place.
GDP also excludes all intrmiediate goods simply to avoid double counting, An intermediate good is a good used in the production of another good. If a beer brewery firm buys some liters of water to produce beer, the water is an intermediate good and the beer is the final good. If the same quantity of water is purchased by a household for drinking, the water becomes a final good and is included in GDP. GDP includes only the value of final goods. Also , since GDP is measured over a given period of time usually a year, the value of goods items produced in the past (ie . Outside the measuring period of time ) are not included in GDP.
2. Net domestic product ( NDP ):
NDP is the market value of all final goods and services produced in a country after subtracting losses from the depreciation. In a given period , a country stock of capital equipment and structures get old and worn out for production to continue , these equipment and structures have to be replaced. The value of replacement is known as depreciation allowance or capital consumption allowance.
Thus, GDP – D = NDP
3. Personal income ( PI ):
Personal income is the income that households and non – corporate business receive unlike , GDP and NDP personal income excludes retained earnings ie. income that corporations have earned in the form of dividends . When a corporation makes some profit , the management may decide for certain reason to pay out all or part of it to the stockholders as dividends or to retain all or part of the profit. The part retained are ploughed back into the business and therefore is not available to the owners of the business as income .
Thus, NDP -r E + Ty + tp = P1.
4. Disposable income ( Yd ) :
Disposable income is the income that households and non corporate businesses have left after satisfying their obligation to the give . It equals personal income minus taxes ( T ) .
Thus, P1 -T = Yd .

Name: Dickson Ezinne Edith
Reg no: 2020/242619
Department: Economics

The three most important ways of measuring National Income are:

1. Product Method
2. Income Method
3. Expenditure Method

1. PRODUCT METHOD:
In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process. Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.

2. INCOME METHOD:
Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration. Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.

3. EXPENDITURE METHOD:
In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

1. Product method: In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.Only the final goods and services are included and the intermediary goods and services are left out. 
2. Income method: Under this method, national income is calculated by adding up all the incomes generated in the course of producing national product.The data pertaining to income are obtained from different sources.
3. Expenditure method: Under this method, the total expenditure incurred by the society in a particular year is added together.
4. Value added method: It is the difference between the value of material inputs and outputs at each stage of production. The differences are all added up for all industries in the economy to get the gross domestic product

ECO 102 online Assignment
Question: list and explain the methods for Measuring National Income:
Name: Nwangwu chigozie Joseph
Department: pure and industrial chemistry
Reg.no: 2020/243612
Email address: Joseph.nwangwu.243612@unn.edu.ng
Answer
There are four methods of measuring national income
There are:
1.Product Method
2. Income Method:
3.Expenditure Method:
4. And Value Added Method:
1. Product Method:
According to this method, the total value of final goods and services produced in a country during a year is calculated at market prices. To find out the GNP, the data of all productive activities, such as agricultural products, wood received from forests, minerals received from mines, commodities produced by industries, the contributions to production made by transport, communications, insurance companies, lawyers, doctors, teachers, etc. are collected and assessed at market prices. Only the final goods and services are included and the intermediary goods and services are left out.

2. Income Method:
According to this method, the net income payments received by all citizens of a country in a particular year are added up, i.e., net incomes that accrue to all factors of production by way of net rents, net wages, net interest and net profits are all added together but incomes received in the form of transfer payments are not included in it. The data pertaining to income are obtained from different sources, for instance, from income tax department in respect of high income groups and in case of workers from their wage bills.

3. Expenditure Method:
According to this method, the total expenditure incurred by the society in a particular year is added together and includes personal consumption expenditure, net domestic investment, government expenditure on goods and services, and net foreign investment. This concept is based on the assumption that national income equals national expenditure.

4. Value Added Method:
Another method of measuring national income is the value added by industries. The difference between the value of material outputs and inputs at each stage of production is the value added. If all such differences are added up for all industries in the economy, we arrive at the gross domestic product

The various method of measuring national income are :
a.) Product method.
b.) Income method.
c.) Expenditure method.
Product method; In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods are referred to those goods which are directly consumed and not used in further production process. Goods which are further used in production process are called intermediate goods. In value of final goods value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of values of goods to avoid the problem of double counting we can use the value addict on method in which not the value of final good value of intermediate good at each stage of production is calculated and the these are summed up to arrive at GDP. The money value is calculated at market prices.

2.) Income Method; In this method, National income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land, and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.
Besides, there are some self employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called NDP at factor costs.
3.) Expenditure Method; In this method, National income is measured as a flow of expenditure. GDP is sum total of private consumption expenditure. GDP is sum total of private consumption expenditure. Government consumption expenditure, gross capital formation ( Government and private) and net exports ( Exports – Imports)

1product method
2income method
3expenditure method
1product method:the value of all goods and services produced in different industries during the year is added up . This is also known as value added method to GDP orGDP at factor cost by industry of origin
2income method: people of a country who produce GDP during a year receive income from their work.thus GDP by income method is sum of all factor incomes:wages and salaries (compensation of employees )+rent+interest,+profit
3expenditure method:this method focuses on goods and services produced within the country during one year

METHODS OF MEASURING THE NATIONAL INCOME
1. Production or value added method
2. Income method
3. Expenditure method

1. Production/value added method:
Here, national income is measured as a flow of goods and services. It is the most direct method of arriving at an estimate of a country national output or income. You add the output figures of all forms in the economy to get the total value of the nation’s output. It can be grouped into certain product categories corresponding to industries or sectors (that is the primary, secondary and tertiary sector). The only problem here is the problem of double-counting. It arises due to the fact that the industry’s output is often the input of another industry. This problem can be avoided by using the concept of ‘value-added’ , which is the difference between output value and include at each stage of production. Lipsey said “a firm’s output is defined as its value added; the sum of all values added must be the value,at factor cost of all goods and services produced by the economy”. The value addition is calculated and is summed up to arrive at GDP.

2. National income:
Here, national income is measured as a flow of factor incomes. We measure incomes generated by the factors of production. There are four factors of production and they are; land, labour, capital and entepreneurship. Land gets rent, labour get salaries and wages, capital gets interest and entepreneurship get profit. The sum total of all these factor incomes is known as the NDP at factor cost.

3. Expenditure method:
In this method, national income is calculated by adding up the flows of expenditure needed to purchase the nation’s output. While estimating the value of national product by the expenditure method we must only record final expenditures. We exclude all expenditures on intermediate goods and services. Total final expenditure is divided into private consumption, investment, government consumption expenditure(spending), net exports that is export and import. These four components may now be further developed.

Name : Ogbuagu daniella Agnes
Registration number:2020/242618
Department: Economics
Methods of calculating Nation Income

Measurement of National Income
There are three ways of measuring the National Income of a country. They are from the income side, the output side and the expenditure side. Thus, we can classify these perspectives into the following methods of measurement of National Income.

Methods of Measuring National Income
Product Method
Income Method
Expenditure Method

1. Product Method
Under this method, we add the values of output produced or services rendered by the different sectors of the economy during the year in order to calculate the National Income.
In this method, we include only the value added by each firm in the production process in the output figure.

Hence, we use the value-added method. The value-added output of all the sectors of the economy is the GNP at factor cost.
However, this method is unscientific as it adds the value of only those goods and services that are sold in the market or are available for sale in the market
Browse more Topics under National Income
The concept of National Income
The concept of Consumption, Saving, and Investment
Economic Growth
Economic Fluctuations

2. Income Method
Under this method, we add all the incomes from employment and ownership of assets before taxation received from all the production activities in an economy.
Thus, it is also the Factor Income method. We also need to add the undistributed profits of the private sector and the trading surplus of the public sector corporations.
However, we need to exclude items not arising from productive activities such as sickness benefits, interest on the national debt, etc.

3. Expenditure Method
This method measures the total domestic expenditure of the economy. It consists of two elements, viz. Consumption expenditure and Investment expenditure.
Consumption expenditure includes consumption expenditure of the household sector on goods and services and consumption outlays of the business sector and public authorities.
Investment expenditure refers to the expenditure on the making of fixed capital such as Plant and Machinery, buildings, etc.

1. The Product (Output) Method
2. The Income Method
3. The Expenditure Method

1. The Product (Output) Method: The most direct method of arriving at an estimate of a country’s national output or income is to add the output figures of all firms in the economy to get the total value of the nation’s output. The outputs can be grouped into certain product categories corresponding to industries or to sectors (such as the primary sector, secondary sector and the tertiary sector). When we use the output approach, one major problem arises. This is known as the problem of double counting. It arises due to the fact that the industry’s output is often the input of another industry. This is why when we add up the values of all sales, the same output is counted again and again as it is sold by one firm to another. This problem is avoided by using the concept of ‘value added’, which is the difference between output value and input at each stage of production. In other words, each firm’s value added is the value of its output minus the value of the inputs that it purchases from other firms. Thus, an automobile manufacturing company’s value added is the value of its output (i.e., the market value of cars) minus the value of tyres and tubes, glass, steel batteries it buys from other firms as also the values of any other inputs, such as electricity and fuel oil that it purchases from other firms. As Lipsey has put it, “A firm’s output is defined as its value added; the sum of all values added must be the value, at factor cost, of all goods and services produced by the economy”. While referring to the concept of value added economists draw a distinc­tion between intermediate goods (like tyres and types which are used as inputs into a further stage of production) and final goods that are the outputs of the economy after eliminating all double (multiple) counting and are used for consumption and not for further production.
In our example, tyres and tubes, glass, steel, electricity were all intermediate goods used at various stages in the production process while cars were final goods. In fact, all investment products used at various stages in the process lead to the final produce, car.
In short, the output approach measures national output called gross domestic products (GDP) in terms of the values added by each of the sectors of the economy. To avoid the problem of double or multiple counting we must either use the value added method or count the total value of all final products.

2. The Income Method: The second approach is to measure incomes generated by production. Income from employment is wages and salaries. Income of self-employed persons includes both wages and return on capital owned by self-employed persons (who are treated as firms in microeconomics). It includes not only the rent of land but also the rent of buildings, plus royalties earned from patents and copyrights. Thus, it is a partly of return of capital.
National income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration. Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.

3. The Expenditure Method: From the expenditure side national income is calculated by adding up the flows of expenditure needed to purchase the nation’s output. However, while estimating the value of national product by the expenditure method we must only record final expenditures. We have to exclude all the expen­diture on intermediate goods and services. While measuring national in­come total final expenditure (TFE) is divided into four broad categories: consumption, investment, government expenditure (spending), exports and imports. These four components may now be further developed.
(a). Consumption: Consumption expenditure refers to all purchases by households of cur­rently produced goods and services, except new houses which are counted as investment. Secondly, consumption of second hand goods like used cars is to be excluded to avoid double counting. Thirdly, we have to measure purchases of goods and services made in a year. We need not measure their actual consumption that occurs during the year (or any other period under consideration).
(b). Investment: Investment is expenditure on currently produced capital goods like plant and equipment and housing. Stocks are also included. Investment may be gross or net. Gross investment less depreciation is net investment, or net addition to (purchase of) society’s stock of capital.
(c). Government Expenditure: Money that government spends falls into two categories, one is called transfer payments. These are money paid out for which nothing is given back to the government. One good example is pension paid to retired people. There is a sort of transfer of money from tax-payers to the people receiving pensions.These transfer payments are not part of the GNP, since they do not arise from production. It is government spending for goods and of services that enters the GNP. Thus, the purchase of a wagon for the Railway Board and the wages of postal workers are put of the GNP. Only government expenditure on currently produced goods and services is to be included. This is known as exhaustive expenditure. All transfer expenditure is to be excluded to avoid double counting. As Lipsey has put it, “All government payments to factors of production in return for factor services rendered or payments for goods and services are counted as part of the GDP.”
Examples are wages and salaries of government employees, government expenditure on goods purchased from farmers for distribution through the public distribution system (ration shops) and on medicines purchased from the private sector for distribution through government hospitals.

Name:Mbah Nnamdi Kelvin
Reg no:2020/248440
Dept:pure and industrial Chemistry
VARIOUS METHODS OF MEASURING NATIONAL INCOME
1: Expenditure method
2: income method
3: Product method(output method)
4: Value added method

1: EXPENDITURE METHOD:According to this method, the total expenditure incurred by the society in a particular year is added together and includes personal consumption expenditure, net domestic investment, government expenditure on goods and services, and net foreign investment. This concept is based on the assumption that national income equals national expenditure. 
From the expenditure side national income is calculated by adding up the flows of expenditure needed to purchase the nation’s output. However, while estimating the value of national product by the expenditure method we must only record final expenditures.

We have to exclude all the expen­diture on intermediate goods and services. While measuring national in­come total final expenditure (TFE) is divided into four broad categories: consumption, investment, government expenditure (spending), exports and imports. These four components may now be further developed.
2: INCOME METHOD:According to this method, the net income payments received by all citizens of a country in a particular year are added up, i.e., net incomes that accrue to all factors of production by way of net rents, net wages, net interest and net profits are all added together but incomes received in the form of transfer payments are not included in it. The data pertaining to income are obtained from different sources, for instance, from income tax department in respect of high income groups and in case of workers from their wage bills. 
3: PRODUCT METHOD:The most direct method of arriving at an estimate of a country’s national output or income is to add the output figures of all firms in the economy to get the total value of the nation’s output. The outputs can be grouped into certain product categories corresponding to industries or to sectors (such as the primary sector, secondary sector and the tertiary sector).
PROBLEM:
When we use the output approach, one major problem arises. This is known as the problem of double counting. It arises due to the fact that the industry’s output is often the input of another industry. This is why when we add up the values of all sales, the same output is counted again and again as it is sold by one firm to another. This problem is avoided by using the concept of ‘value added’, which is the difference between output value and input at each stage of production.
4:VALUE ADDED METHOD:Another method of measuring national income is the value added by industries. The difference between the value of material outputs and inputs at each stage of production is the value added. If all such differences are added up for all industries in the economy, we arrive at the gross domestic product. 

NAME: ONAH JUDITH UGOCHI
REG NO: 2020/242646
DEPT: ECONOMICS
EMAIL: onahjudith4@gmail.com

Methods of Measuring National Income.

1) Product (output) Method

2)Income Method

3)Expenditure Method

1). PRODUCT (OUTPUT) METHOD:
This method is based on returns made by firms and public corporations concerning the annual value of their output.
Under this method, we add the values of output produced or services rendered by the different sectors of the economy during the year in order to calculate the National Income.
This method is used to measure the total value of everything produced in the country during the year. It is a measure of the goods and services becoming available to the nation for consumption or adding to wealth. The money value of goods and services produced in an accounting year is called Gross National Product (GNP). Which is defined by J.R. Hicks as “the collection of goods and services reduced to a common basis by being measured in terms of money.”

PROBLEMS:
When we use the product (output) method certain problems arise:

(I) UNPAID SERVICE:
In less developed countries like India, people do more things for themselves. They grow their own food, make their own clothes, etc. They do not pay for all the commodities and services they need. The national income of such a country will be that much less because most people provide so many unpaid (free) services for themselves.
The GNP figure includes only productive activity for which payment is received. Any unpaid service (s) will not be included.
Therefore, any service which people undertake for themselves will be excluded from the figures. This indicates one area for caution in comparing national income figures for different countries.

(II) DOUBLE COUNTING:
Another problem in drawing up the production figures is the need to avoid including the same item twice.
In order to avoid this problem of double counting, it is only the value added by each industry which is included, i.e., the value of the industry’s output minus the value of the materials, etc. bought from other industries. Thus, we need figures of only the final selling values of goods and services.

(III) STOCK APPRECIATION:
Another problem arises due to stock appreciation. Some final goods will be added to stocks and not incorporated in other goods in the current year. On the other hand, the value of current output will include the using up of stocks inherited from the past. These problems are dealt with by including net additions to stocks, which may be positive or negative, in the domestic product.

(IV) INTERNATIONAL TRANSACTIONS:
The value of goods and services produced within the country includes their import content. Imports yields incomes to owners of resources in other countries. They are part of the domestic products of other countries. Hence, they must be deducted from the GNP. Exports yield income to the domestic factors. So they are included in the domestic product. Their import is dealt with in the general deduction of imports.

2) THE INCOME METHOD:
The income method of calculating the national income is based on figures collected from the income tax departments.
Under this method, we add all the incomes from employment and ownership of assets before taxation received from all the production activities. It includes the total of all wages and salaries earned, rents and royalties, interest received on loans, and the profits of companies, private businesses, farms, fisherman and traders.

PROBLEMS:

(I) MIXED INCOME:
‘Mixed’ income are derived from a mixture of factors. So, in practice, it is virtually impossible to separate the returns to land, labour and capital.

(II) TRANSFER INCOME:
It is important to include in the calculations only those incomes which correspond to the production of goods and services. Otherwise there may be double-entry, i.e., the same income may be counted twice.
The sum-total of all incomes includes both factor incomes and transfer incomes. Since the latter are paid of the former without any goods and services being made available as a result, they exaggerate the flow of income in real terms. They are double-counted, once as factor incomes and again as transfer incomes. They must, therefore, be excluded from national income.

(III) IMPUTED INCOME:
One item which often creates problem is ‘ownership of dwellings’. People who let out houses for rent are providing a service. So the rents received by them must be included in the national income figures. But account must also be taken of owner- occupied houses. No rent is actually paid here. But the houses provide the same service to the dwellers as rented accommodation. The problem is overcome by imputing a rent to such houses, i.e., the amount the owners would probably have received if they had rented the houses.

(IV) GOVERNMENT SERVICES:
There are many services provided by the government of a country which satisfy the collective wants of the community as opposed to the individual wants of the citizens.
Each citizen does not pay according to the amount of such services that he (or she) wants. A pacifist has to help to pay for defence; a wealthy person has to help in the provision of social health and education services which he or she may never use. This list of anomalies could be greatly extended. Is it, then, realistic to include the incomes derived from producing such services as part of the income derived from satisfying wants?
Government services are included in the national income on the ground that the community pays for them simply because it surely needs them.

(V) NET FACTOR INCOME FROM ABROAD:
Some people and firms earn income by producing goods and services or owning property in other countries. Such incomes will not be included in calculations based on the earnings of factors within the country (the domestic income) and must be added to the total.
On the other hand, some of the domestic income is earned by non-residents as a result, for example, of the operation of foreign firms within a country. These incomes must be deducted when computing the national income. These two adjustments can be made together by adding net income from abroad if it is positive or by deducting it if it is negative.

3). THE EXPENDITURE METHOD:
A third way of arriving at this same total is to add up the total national expenditure. We have to include private and government expenditure and the value of newly — created capital.
The expenditure method depends on some­what less accurate statistics because of the great number of retail outlets where most of the relevant transactions take place. Information about retailing, wholesaling and the provision of some service is obtained from the Census of Distribution. Additional information is obtained from sales tax (and excise duty) returns.

PROBLEMS:

I) EXPORTS AND IMPORTS:
Some of the goods produced in this country will be sold abroad.
For instance, when Nigeria products are sold in China, the expenditure takes place in China and is, therefore, not included in the figure.
Yet the value of those products will be included in the figure for total production in Nigeria.
Therefore, there is again a danger of losing the equality of Total Production and Total expenditure. To remove this danger we must subtract the value of imports.

(II) INDIRECT TAXES AND SUBSIDIES:
We do not have an expenditure figure equivalent to the amount which producers receive for producing the goods and services during the year.
In cases like this, where there are taxes on goods and services (‘indirect taxes’ as they are called), the amount of the tax must be deducted from the expenditure figures.
When indirect taxes have been subtracted and subsidies added the total arrived at is gross domestic expenditure at factor cost, which will be the same as gross domestic product at factor cost.

(III) FACTOR INCOME FROM ABROAD:
We have covered income received from the sale of goods and services produced in this country. But some people in this country receive income as a result of their ownership of property abroad. For example, they receive interest on profits on their assets abroad.
So, to get a true indication of the amount that production has added to the country’s wealth, one should set aside a certain amount of the year’s output to cover this wearing out of capital. Hence, the final item in the calculation — capital consumption (or depreciation). When this amount is deducted, the result is Net National Product at factor cost, or, in other words, National Income.

NAME:Friday Blessing Samuel
REG.NO-:2020/247922
DEPT:Philosophy
The national income of a country can be measured by three alternative methods, Namely;(i) Product Method
(ii) Income Method, and
(iii) Expenditure Method
PRODUCT METHOD:- Under this method, we add the values of output produced or services rendered by the different sectors of the economy during the year in order to calculate the National Income.
In this method, we include only the value added by each firm in the production process in the output figure.
Hence, we use the value-added method. The value-added output of all the sectors of the economy is the GNP at factor cost.
However, this method is unscientific as it adds the value of only those goods and services that are sold in the market or are available for sale in the market.
INCOME METHOD:-
Under this method, we add all the incomes from employment and ownership of assets before taxation received from all the production activities in an economy.
Thus, it is also the Factor Income method. We also need to add the undistributed profits of the private sector and the trading surplus of the public sector corporations.
However, we need to exclude items not arising from productive activities such as sickness benefits, interest on the national debt, etc.

EXPENDITURE METHOD
Expenditure Method

This method measures the total domestic expenditure of the economy. It consists of two elements, namely;
i) Consumption expenditure and
ii) Investment expenditure.

Consumption expenditure includes consumption expenditure of the household sector on goods and services and consumption outlays of the business sector and public authorities.
Investment expenditure refers to the expenditure on the making of fixed capital such as Plant and Machinery, buildings, etc.

Name: UGWUOKE CHIKWADO
Reg. Number: 2020/242634
E-mail: ugwuokechikwado599@gmail.com
1. The income method: Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.

Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.

2. Expenditure Method: In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

This method measures the total domestic expenditure of the economy. It consists of two elements, viz. Consumption expenditure and Investment expenditure.

Consumption expenditure includes consumption expenditure of the household sector on goods and services and consumption outlays of the business sector and public authorities.

Investment expenditure refers to the expenditure on the making of fixed capital such as Plant and Machinery, buildings, etc.

3. Product Method: In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.

Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.

To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP.
The money value is calculated at market prices so sum-total is the GDP at market prices. GDP at market price can be converted into by methods discussed earlier.

1 Product method:in this mehod, national income is measured as a flow of goods and services.We calculate money value of all final goods and services produced in an economy during a year.Final goods here refers to those goods which are directly consumed and not used in further production process.Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.

To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP.

ADVERTISEMENTS:The money value is calculated at market prices so sum-total is the GDP at market prices. GDP at market price can be converted into by methods discussed earlier.
2 Income Method:Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.

Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.
3Expenditure Method:In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

Igboanugo jacinta ugochukwu
2020/243842
Education Economic
09068380234

Methods for Measuring National Income: 3 Methods | Economics
The following are the three methods for measuring national income. The methods are:
1..Expenditure method
2. The Product (Output) Method
3The Income Method

1. Expenditure
Money that government spends falls into two categories, one is called transfer payments. These are money paid out for which nothing is given back to the government. One good example is pension paid to retired people. There is a sort of transfer of money from tax-payers to the people receiving pensions.

These transfer payments are not part of the GNP, since they do not arise from production. It is government spending for goods and of services that enters the GNP. Thus, the purchase of a wagon for the Railway Board and the wages of postal workers are put of the GNP.

2. The Product (Output) Method:
The most direct method of arriving at an estimate of a country’s national output or income is to add the output figures of all firms in the economy to get the total value of the nation’s output. The outputs can be grouped into certain product categories corresponding to industries or to sectors (such as the primary sector, secondary sector and the tertiary sector).When we use the output approach, one major problem arises. This is known as the problem of double counting.
In other words, each firm’s value added is the value of its output minus the value of the inputs that it purchases from other firms. Thus, an automobile manufacturing company’s value added is the value of its output (i.e., the market value of cars) minus the value of tyres and tubes, glass, steel batteries it buys from other firms as also the values of any other inputs, such as electricity and fuel oil that it purchases from other firms
3. The Income Method:
The second approach is to measure incomes generated by production.
Income from employment is wages and salaries. Income of self-employed persons includes both wages and return on capital owned by self-employed persons (who are treated as firms in microeconomics). is to be interpreted in a broad sense. It includes not only the rent of land but also the rent of buildings, plus royalties earned from patents and copyrights. Thus, it is a partly of return to land and partly a return to capital. It is the major part of return on capital to the private sector.

Name: OBIAKOR CHIKA VINCENT.
Reg No: 2020/246576.
Email Address :Chikaibiakor47@gmail.Com

Methods of Measuring National income.

The following points highlight the top four methods of measuring national income (NI). The methods are: 1. Product Method 2. Income Method 3. Expenditure Method 4. Value Added Method.

Method # 1. Product Method:
According to this method, the total value of final goods and services produced in a country during a year is calculated at market prices.

To find out the GNP, the data of all productive activities, such as agricultural products, wood received from forests, minerals received from mines, commodities produced by industries, the contributions to production made by transport, communications, insurance companies, lawyers, doctors, teachers, etc. are collected and assessed at market prices.

#Note that :
Only the final goods and services are included and the intermediary goods and services are left out.

Method # 2. Income Method
This is another method of measuring N.I. In this method, the net income payments received by all citizens of a country in a particular year are added up, i.e., net incomes that accrue to all factors of production by way of net rents, net wages, net interest and net profits are all added together but incomes received in the form of transfer payments are not included in it.

The data pertaining to income are obtained from different sources, for instance, from income tax department in respect of high income groups and in case of workers from their wages bills.

Method # 3. Expenditure Method:
According to this method, the total expenditure incurred by the society in a particular year is added together and includes personal consumption expenditure, net domestic investment, government expenditure on goods and services, and net foreign investment. This concept is based on the assumption that national income equals national expenditure.

Method # 4. Value Added Method:
ADVERTISEMENTS:

Another method of measuring national income is the value added by industries. The difference between the value of material outputs and inputs at each stage of production is the value added. If all such differences are added up for all industries in the economy, we arrive at the gross domestic product.

NATIONAL INCOME
The national income is the total income accruing to all the factors of production in a country. It is the estimated value of goods and services produced in a country during a specified period of time, usually a year.

METHODS OF MEASURING NATIONAL INCOME
1. Income method
2. Output/product method
3. Expenditure method

INCOME METHOD:. This is the adding together of all the incomes received by all the factors of production in the form of wages and salaries. To avoid double counting, payments are not included. The income which is included must be that which arises from the production of goods and services.
OUTPUT/PRODUCT METHOD:. This is measured by adding together the value of the net contributions of the various sectors in the country.
EXPENDITURE METHOD:. This method of measuring national income measures the total expenses made on goods and services by individuals,firms and government in a country. In using this approach, it is necessary to avoid double counting by identifying expenditure of a final nature. Transfer payments such as pensions paid to retired workers,gifts to beggars are also not included.

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Department: ECONOMICS
Reg no. 2020/245277
Email: njiokuchisom@gmail.com

Name: UBAH VIVIAN CHIOMA
Dept: EDUCATION ECONOMICS
Reg.No: 2020/243849

METHODS OF MEASURING NATIONAL INCOME

National income means the value of goods and services produced by a country during a financial year. Thus, it is the net result of all economic activities of any country during a period of one year and is valued in terms of money.
3 Important Methods for Measuring National Income
The national income of a country can be measured by three alternative methods:
(i) Product Method
(ii) Income Method, and
(iii) Expenditure Method.

1. Product Method:In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.
which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.
To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP. The money value is calculated at market prices so sum-total is the GDP at market prices.

2. Income Method:Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.
Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.

3. Expenditure Method:
In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).
Factor income earned by factors of production is spent in the form of expenditure on purchase of goods and services produced by firms.

1. This method measures national income as sum total of final expenditures incurred by households, business firms, government and foreigners.

2. This total final expenditure is equal to gross domestic product at market price, i.e. ∑Final Expenditure = GDPMP.

3. This method is also known as ‘Income Disposal Method’.

Components of Final Expenditure:

Expenditure is undertaken by all the sectors of an economy: Households, Government, Firms and the Foreign Sector.The various components of final expenditure are:

1. Private Final Consumption Expenditure (PFCE):
It refers to expenditure incurred by households and private non-profit institutions serving households on all types of consumer goods, i.e. durable (except houses), semi-durable, non-durable goods and services.

i. PFCE = Household Final Consumption Expenditure + Private Non-Profit Institutions Serving Households Final Consumption Expenditure
ii. PFCE includes expenditures incurred by normal residents, whether in the domestic territory or abroad. So, any expenditure incurred by residents during their foreign tour/travel will be added in PFCE. However, any expenditure incurred by non-residents and foreign visitors in the domestic market will be deducted from PFCE.

2. Government Final Consumption Expenditure (GFCE):
It refers to the expenditure incurred by general government on various administrative services like defense, law and order, education etc. Government produces goods and services with the aim of social welfare without any intention of earning profits.

3. Gross Domestic Capital Formation (GDCF) or Gross Investment:
It refers to the addition to capital stock of the economy. It represents the expenditure incurred on acquiring goods for investment by the production units located within the domestic territory.

There are two components of GDCF:
(i)Formation: It refers to the expenditure incurred on purchase of fixed assets.
This expenditure is generally divided into three sub-categories:

(a) Gross Business Fixed Investment: It includes expenditure on the purchase of new plants, machinery, equipment’s, etc.
(b) Gross Residential Construction Investment: It includes expenditure on purchase or construction of new houses by the households.
(c) Gross Public Investment:It includes expenditure on construction of flyovers, roads, bridges etc. by the government.

(ii) Inventory Investment (Change in Stock): It refers to the physical change in the stock of raw material, semi-finished goods and finished goods lying, with the producers. It is included as an investment item because it represents the goods produced but not used for current consumption. It is calculated as the difference between the closing stock and the opening stock of the year.It means,
GDCF = Gross Fixed Capital Formation + Inventory Investment; or
GDCF = Gross Business Fixed Investment + Gross Residential Construction Investment + Gross Public Investment + Inventory Investment.
It is important to understand that purchase of shares and debentures, either old or new, is not included in investment. For example, if I have purchased 500 shares of Reliance Industries, it may be an investment from my point of view, but for economy, it is simply a transfer of purchasing power and not an investment.

4. Net Exports (X – M): It refers to the difference between exports and imports of a country during a period of one year. The sum total of four components of final expenditure gives Gross Domestic Product at Market Price (GDPMP), i.e. GDPMP = PFCE + GFCE + GDCF + (X-M)
1. Exports (X) refer to expenditure by foreigners on purchase of domestic products. The exported goods have been produced within the country’s domestic territory So; they are included in output of an economy.
2. Imports (M) is the expenditure by residents on foreign products. Imports are deducted to obtain domestic product as they are not produced within the domestic territory.
3. Instead of treating exports and imports separately, the difference between the two is taken and is termed as Net Exports.

Steps of Expenditure Method:
The steps involved in calculating National Income by Expenditure Method are:
Step 1: Identify the Economic Units incurring Final Expenditure: All the economic units, which incur final expenditure within the domestic territory, are classified under 4 groups:
(i) Household sector;
(ii) Government sector;
(iii) Producing sector;
(iv) Rest of the world sector.

Step 2: Classification of Final Expenditure: Final expenditures incurred by the above mentioned economic units are estimated and classified under the following heads:
(i) Private Final Consumption Expenditure (PFCE)
(ii). Government Final Consumption Expenditure (GFCE)
(iii).Gross Domestic Capital Formation (GDCF)

Step 3: Calculate Domestic Income (NDPFC): By subtracting the amount of depreciation and net indirect taxes from GDPMP, we get domestic income, i.e. NDPFC = GDPMP – Depreciation – Net Indirect Taxes.

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.
National Income (NNPFC) = NDPFC+ NFIA

Precautions of Expenditure Method:
The various precautions to be taken while using the Expenditure Method are:
1. Expenditure on Intermediate Goods will not be included in the national income as it is already included in the value of final expenditure. If it is included again, it will lead to double counting of expenditures.
2. Transfer Payments are not included as such payments are not connected with any productive activity and there is no value addition.
3. Purchase of second-hand goods will not be included as such expenditure has already been included when they were originally purchased. Such goods do not affect the current flow of goods and services. However, any commission or brokerage on such goods is included as it is a payment made for productive service.
4. Purchase of financial assets (shares, debentures, bonds etc.) will not be included as such transactions do not contribute to current flow of goods and services. These financial assets are mere paper claims and involve a change of title only. However, any commission or brokerage on such financial assets is included as it is a productive service.
5. Expenditure on own account production (like production for self-consumption, imputed value of owner occupied houses, free services from general government and private non-profit making institutions serving households) will be included in the national income since these are productive services.
Thanks

NAME:EGWIM CHINONSO THERESA
REG NO:2020/242593
LEVEL: 100
EMAIL ADDRESS: egwimtheresa2@gmail.com

National income refers to the monetary value over a period of time of the output flow of goods and services produced in an economy.

The Uses of National Income Statistics
Measuring the level and rate of growth of national income (Y) is essential to keep track of:
The rate of economic growth
Changes to living standards
Changes to the distribution of income b/w groups

* Gross Domestic Product
The total value of output in an economy is the Gross Domestic Product (GDP) and is used to measure economic activity changes. GDP encompasses the production of foreign-owned enterprises located in a country following the foreign direct investment.

There are three different ways to calculate GDP that should all add up to the same amount: The national output is equal to national expenditure (Aggregate demand) which in turn is equal to national income.

The equation for GDP using this approach is
GDP = C(Household spending) + I(Capital investment spending) + G(Government spending) + (X(Exports of Goods and Services)-M(Imports of Goods and Services)

1. GDP at Factor Cost:
GDP is the amount of net value added by all producers within the country at the cost factor. Since the net value added is allocated as revenue to the owners of production factors, the sum of domestic factor incomes and fixed capital consumption is GDP (or depreciation).
Thus,
GDP at Factor Cost is equal to the sum of Net value added and Depreciation.
GDP at factor cost includes –
Compensation of employees, i.e., wages, salaries, etc.
Operational surplus, which is both incorporated and unincorporated companies’ business profit.
Mixed-Income of Self- employed.
Conceptually, GDP at the cost factor and GDP at the market price must be equivalent since the cost factor (payments to factors) of the products produced must be equal to the final value at market prices of the goods and services. The retail value of products and services, however, varies from the earnings of the output factors.

2. Net Domestic Product (NDP):
The NDP is the value of the economy’s net production throughout the year. During the manufacturing process, some of the country’s capital equipment wears out or becomes redundant each year. A certain percentage of the gross expenditure removed from GDP is the amount of this capital consumption.
Net Domestic Product = GDP at the expense of Factor – Depreciation

3. Nominal and Real GDP:
It is referred to as GDP at current prices or nominal GDP when GDP is calculated based on the current price. On the other hand, if GDP is measured in a given year based on fixed costs, it is referred to as GDP at constant prices, or actual GDP.
Nominal GDP is the value of the goods and services produced in a year, calculated at the current market) prices in terms of rupees (money).

Three Important Methods for Measuring National Income
There are three techniques to compute national income:
Income Method
Product/ Value Added Method
Expenditure Method

1.Income Method
National income is calculated using this method as a flow of factor incomes. Labor, capital, land, and entrepreneurship are the four main components of production. Labour is compensated with wages and salaries, money is compensated with interest, the land is compensated with rent, and entrepreneurship is compensated with profit.
Furthermore, certain self-employed individuals, such as doctors, lawyers, and accountants, use their own labour and capital. Their earnings are classified as mixed-income. NDP at factor costs is the total of all of these factor incomes.
National Income is calculated as a flow of income in this case.
NI can be calculated as follows:
Employee compensation + Operating surplus (w + R + P + I) + Net income + Net factor income from overseas = Net national income.
Where,
Wage stands for wage and salaries
R stands for rental income.
P stands for profit.
I stand for mixed-income.

2. Product/ Value Added Method
National income is calculated using this method as a flow of goods and services. During a year, we determine the monetary value of all final goods and services generated in an economy. The term “final goods” refers to goods that are consumed immediately rather than being employed in a subsequent manufacturing process.
Intermediate goods are goods that are used in the manufacturing process. Because the value of intermediate products is already included in the value of final goods, we do not count the value of intermediate goods in national income; otherwise, the value of goods would be double-counted.
To avoid duplicate counting, we can use the value-addition approach, which calculates value-addition (i.e., the value of the end good plus the value of the intermediate good) at each stage of production and then adds them together to get GDP.
The sum-total is the GDP at market prices since the money value is measured at market prices. The methods outlined before can be used to convert GDP at market price.
The flow of goods and services is used to calculate national income.
NI can be calculated as follows:
G.N.P. – COST OF CAPITAL – DEPRECIATION – INDIRECT TAXES = NATIONAL INCOME

3. Expenditure Method
National income is calculated using this method as a flow of expenditure. The gross domestic product (GDP) is the total of all private consumption expenditures. Government consumption expenditure, gross capital formation (public and private), and net exports are all factors to consider (Export-Import).
As said above, the flow of expenditure is used to calculate national income.
The Expenditure technique can be used to calculate NI as follows:

National Income+National Product+National Expenditure=National Income+National Product+National Expenditure=National Expenditure.

The national income of a country can be measured by three alternative methods: (i) Product Method (ii) Income Method, and (iii) Expenditure Method.

1. Product Method
In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.
National income Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.
To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP
The money value is calculated at market prices so sum-total is the GDP at market prices. GDP at market price can be converted into by methods discussed earlier.

2. Income Method:
Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.
Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.
3. Expenditure Method:
In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import.

NAME: NWANOSIKE CHINONSO AMOS
MATRIC NO: 2020/242603
COURSE CODE: ECO 102
COURSES TITLE: PRINCIPLES OF ECONOMICS 2
LEVEL: 100

METHODS OF MEASURING NATIONAL INCOME

The national income of a country can be measured by three alternative methods: (i) Product Method (ii) Income Method, and (iii) Expenditure Method.

1. PRODUCT METHOD
In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.

Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.

To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP.
The money value is calculated at market prices so, sum-total is the GDP at market prices. GDP at market price can be converted into by methods.
Product method is therefore calculated thus;
Y=NP_NE
Where Y is income, NP is National product and NE is National Expenditure

2. INCOME METHOD
Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.

Apart from this, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.
Income method is therefore calculated thus;
Y=wages and salaries+Rent+Interest+Profit.

3. EXPENDITURE METHOD:
In this method, national income is measured as a flow of expenditure. GDP is the sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).
Expenditure method is therefore calculated as;
C+I+G+(X_M)
Where;
C=consumption
I=Income/Investment
G=Government Consumption Expenditure
X=Exports
M=Imports.

Name: Isi Vincent Offorbuike
Reg No: 2019/249461
Department: Science Laboratory Technology
Option: Microbiology/virology
E_mail: vincent.isi.249461@unn.edu.ng

There are a number of concepts pertaining to national income and methods of measurement relating to them.

(A) Gross Domestic Product (GDP):
GDP is the total value of goods and services produced within the country during a year. This is calculated at market prices and is known as GDP at market prices. Dernberg defines GDP at market price as “the market value of the output of final goods and services produced in the domestic territory of a country during an accounting year.”

There are three different ways to measure GDP:

Product Method, Income Method and Expenditure Method.

(B) GDP at Factor Cost:
GDP at factor cost is the sum of net value added by all producers within the country. Since the net value added gets distributed as income to the owners of factors of production, GDP is the sum of domestic factor incomes and fixed capital consumption (or depreciation).
Thus GDP at Factor Cost = Net value added + Depreciation.

GDP at factor cost includes:

(i) Compensation of employees i.e., wages, salaries, etc.

(ii) Operating surplus which is the business profit of both incorporated and unincorporated firms. [Operating Surplus = Gross Value Added at Factor Cost—Compensation of Employees—Depreciation]

(iii) Mixed Income of Self- employed.

Conceptually, GDP at factor cost and GDP at market price must be identical/This is because the factor cost (payments to factors) of producing goods must equal the final value of goods and services at market prices. However, the market value of goods and services is different from the earnings of the factors of production.

In GDP at market price are included indirect taxes and are excluded subsidies by the government. Therefore, in order to arrive at GDP at factor cost, indirect taxes are subtracted and subsidies are added to GDP at market price.

Thus, GDP at Factor Cost = GDP at Market Price – Indirect Taxes + Subsidies.

(C) Net Domestic Product (NDP):
NDP is the value of net output of the economy during the year. Some of the country’s capital equipment wears out or becomes obsolete each year during the production process. The value of this capital consumption is some percentage of gross investment which is deducted from GDP. Thus Net Domestic Product = GDP at Factor Cost – Depreciation.

Name:Ekwe Okwuchukwu Cletus
Department: Economics
Reg. No:2020/242587

The various methods of measuring the national income are:
1. The output method
2. The income method
3.The expenditure method

1.The Output Method
The output method calculates the total value of final output of gods and services produced in the economy over a specified period of time.It is important to note that all final goods and services must be included regardless of whether they are sold to consumers, government, foreigners or to other firms in the form of capital equipment.To avoid the problem of double counting,and hence overestimation of the country’s total output.Intermefiate of goods must not be included in the final total.Alternatively,the problem of double counting by each firm at different stages of production,rather than final output.

2.The National Method
Since national income arises from the production of goods and services by the factors of production, another way of calculating the value of total output is to sum all of the incomes that these factors receive for services.It involves the summation of all monetary values of the wages and salaries,rent, interest,profits and dividends.This method is referred to as income method of measuring the level of economic activity in any time period (usually one year).It is important to note that only income that gave been received in return for productive services should be included.

3. The Expenditure Method
National income of a country can be obtained through the method of expenditure approach.In this method,the total expenditure incurred by all economic agents in the country in a particular year are added up. These includes the expenditure of individual consumers on goods and services, corporate investments, spending and purchase done by the government on behalf of the public.

Name: Muomegha Maryann Tochi
Reg no: 2020/246802
Email address: maryannmuomegha@gmail.com
Department: philosophy

Product method: In this method national income is measured as a flow of goods and services. we calculate money value of all final goods and services produced in an economy during a year. Final goods here refers to those goods which are directly consumed and not used in further production process. Goods which are further used in production process are called intermediate goods

2. Income method: Under this method national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital,land and entrepreneurship
Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.
Besides there are some self- employed persons who employ their own labour and capital such as doctors advocates, CAs etc. Their income is called mixed income.The sum-total of all these factor income is called NDP at factor cost.

3: Expenditure method: In this method national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure,gross capital formation( Government and private) and net exports(Export-Import)

The national income of a country can be measured by three alternative methods: (i) Product Method (ii) Income Method, and (iii) Expenditure Method.

1. Product Method (Value added)
Product method measures the output of the country. It is also called inventory method. Under this method, the gross value of output from different sectors like agriculture, industry, trade and commerce, etc., is obtained for the entire economy during a year. The value obtained is actually the GNP at market prices. Care must be taken to avoid double counting.
The value of the final product is derived by the summation of all the values added in the productive process. To avoid double counting, either the value of the final output should be taken into the estimate of GNP or the sum of values added should be taken.

2. Income Method (Factor Earning Method)
This method approaches national income from the distribution side. Under this method, national income is calculated by adding up all the incomes generated in the course of producing national product.

3. The Expenditure Method (Outlay method)
Under this method, the total expenditure incurred by the society in a particular year is added together. To calculate the expenditure of a society, it includes personal consumption expenditure, net domestic investment, government expenditure on consumption as well as capital goods and net exports.

METHODS OF MEASURING NATIONAL INCOME. There are four methods of measuring national income: Product method, Income method, Expenditure method and Value Added method.
PRODUCT METHOD: According to this method, the total value of final goods and services produced in a country during a year is calculated at market prices. To find out the GNP, the data of all productive activities, such as agricultural products, wood received from forests, minerals received from mines, commodities produced by industries, the contributions to production made by transport, communications, insurance companies, lawyers, doctors, teachers, etc. are collected and assessed at market prices. Only the final goods and services are included and the intermediary goods and services are left out.
INCOME METHOD: According to this method, the net income payments received by all citizens of a country in a particular year are added up, i.e., net incomes that accrue to all factors of production by way of net rents, net wages, net interest and net profits are all a added together but incomes received in the form of transfer payments are not included in it. The data pertaining to income are obtained from different sources, for instance, from income tax department in respect of high income groups and in case of workers from their wage bills.
EXPENDITURE METHOD: According to this method, the total expenditure incurred by the society in a particular year is added together and includes personal consumption expenditure, net domestic investment, government expenditure on goods and services, and net foreign investment. This concept is based on the assumption that national income equals national expenditure.
VALUE ADDED METHOD: Another method of measuring national income is the value added by industries. The difference between the value of material outputs and inputs at each stage of production is the value added. If all such differences are added up for all industries in the economy, we arrive at the gross domestic product.

Name: okechukwu prosper onyedikachukwu
Department: Business education
Reg no: 2020/242139
Assignment: methods of measuring national Income.

The national Income of a country can be measured by three alternative methods,

1. Product method: in this method national Income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refers to those good directly consumed and not used in further production process.

2. Income method: in this method, the national Income is measured as a flow of factor incomes. There are generally four factors of production, labour, capital, land and entrepreneurship. Labour get wages and salaries, capital get interest, land get rent, entrepreneurship get profit as their remuneration.

3. Expenditure method: in this method, national Income is measured as a flow of expenditure. GDP is sum total of private consumption expenditure. Government consumption expenditure, gross capital formation (consumption and private) and net exports (export – import).

Department: Combined social science ( Economic and philosophy)
Faculty: Social science
Reg number: 2020/245604
Level: 100l
Name: Sunny Precious Ogochukwu
Course code: Eco 102
Answer
1.) Various method of measuring national income are
* Production method or value added method
* Income method
* Expenditure method.
* PRODUCT OR VALUE ADDED METHOD: National income is calculated using this method as a flow of goods and services. During a year, we determine the monetary value of all final goods that are consumed immediately rather than being employed in a subsequent manufacturing process. Because the value of intermediate product is already included in the value of final goods. The value of intermediate goods in national income are not counted otherwise the value of goods will be double-counted. To avoid duplicate counting, we can use the value addition approach, which calculate value addition (or, the value of the end good plus the value of intermediate goods).
The sum total is the GDP at market price since the money value is measured at market price.
The flow of goods and services is used to calculate national income.
National income (NI) can be calculated as follows:
GNP – cost of capital – depreciation – indirect taxes = National income
* INCOME METHOD: National income is calculated using this method as a flow of factor income; labour, capital, land, and entrepreneurship are the four main components of production. Labour is compensated with wages and salaries, money is compensated with interest, the land is compensated with rent, and entrepreneurship is compensated with profit.
Some self employed individual such as doctors, lawyers, and accountant use their own labour and capital. Their earning are classified as mixed – income. NDP at factor cost is the total of all factor income.
National income can be calculated as: Employee compensation + operating surplus (W+R+P+I)+ Net income + net factor income from overseas =Net national income.
* EXPENDITURE METHOD: National income is calculated using this method as a flow of expenditure. The gross domestic product (GDP) is the total of all private consumption expenditures. Government consumption expenditure , gross capital formation ( public and private) and net export are all factors to consider (Export – import).

Name: Ọdụ Gideon Odu
Reg no:2020/242639
Department: Economics
Methods to measure national income.
There are three methods to measure national income of an economy. These are
1. Production method or value added method
2. Income method
3. Expenditure method
Production method
Basically, three steps are involved in applying the production method to compute the national income of an economy. These steps are
1. To identify the producing enterprises and to classify them into industrial sectors according to their activities.
2. To estimate net value added at factor cost of each producing enterprise within the domestic territory of an economy and to add up net value added by all the sector to arrive at net domestic product at factor cost.
3. To estimate net factor income from abroad which has to be added to net domestic product at factor cost to arrive at net income of an economy.
Income method
Net value added at factor cost of producing unit is identical to the sum to factor incomes compensation of employees and operating surplus or mixed income of the self employed to estimate national increase. If factor incomes generated by all the producing unit within the domestic territory of an economy are added up, net domestic product at factor cost is arrived at. Further, if net domestic product at factor cost of an economy, net national product at factor cost or national income of an economy can be estimated.
Expenditure method
Income generated in the process of production is received by factors of production. Such income can be divided into two parts
a). Income from work
b). Income from ownership of capital and entrepreneurship. Income from work are enjoyed by the workers while those of ownership of entrepreneurship are enjoyed by their owners. The income earned by factors of production is either saving. Saving generated,in turn are used for adding to the capital stock or what is called investment. If the final consumption and gross investment expenditure of all economic agent including the rest of the world are added up, this gives up the gross domestic product at market price for an economy. From the GDP at market price, we deduct depreciation provision and net domestic product at factors cost. Add net factor income from abroad to get net national product at factor cost (or national income) of an economy.

Name : Orji David kenechukwu
E-mail : Orjid9881@mail.com
Department : Economics
Level : 100level
Reg.no. : 2020/242635

(1) list and explain deeply the various methods of measuring the national income.
There are three methods of measuring the national income they include
(A) Income method.
(B) Product method.
(C) Expenditure method.

(a). Income method : In this method account is taken of all the income received by individuals , firms and the government within a year for their participation in production. The income received by factors of production in the form of wages or salaries, rent , interest and profits . Is added together . To avoid double counting , transfer incomes or payments are not included. Examples of transfer incomes are gifts given to old people, students and beggars ; pensions paid to old people etc. They are part of people’s income which are already counted . The income which is included must be that which arises from the production of goods and services. There must be something given out in return for a payment. Apart from not adding transfer payments, business expenses are excluded. However, goods and services consumed by producers are included.
By using this approach, we arrive at either the G.N.P or G.D.P at factor cost. This is because the total figure is found by adding up the cost ( ie income ) of the various factors of production. To get the G.N.P or G.D.P at market prices, we add taxes and subtract subsidies.

(b). Output or net product approach : This method sees national income in terms of the monetary value of all goods and services produced by the various economic units (individuals, firms and the government) in a year. In this method, national income is measured by adding together the value of the net contributions of the various sectors or enterprises (both private and public) in the country. To avoid double-counting, income is measured on a value-added basis. ( value added is the value of output, less cost of inputs). For example the cost of raw materials such as flour and sugar used in making bread must be subtracted from the value of bread to get the net contribution of bakeries to national output.
In addition, the value of exports are included while the value of imports are subtracted. Also, the values of goods and services produced and consumed by the producers themselves are included.
National income derived in this way gives the G.D.P at market prices. To get the G.D.P at factor cost, we subtract taxes and add subsidies.

(C). Expenditure approach : This method of measuring national income measures the total expenditure on goods and services by individuals, firms and the government in a country. In using this approach, it is necessary to avoid double-counting by identifying expenditure ( consumption and investment) of a final nature. We include only expenditure on final goods and services. For example, in calculating the value of bread, which is a final consumption type of good, we shall take care not to add to the final price of bread the prices of flour, sugar, yeast and other ingredients used in making bread.
In addition, transfer payments such as pensions paid to retired workers, gifts to beggars etc, are not included.

There are three ways of measuring the National Income of a country. They are from the income side, the output side and the expenditure side. Thus, we can classify these perspectives into the following methods of measurement of National Income.

Methods of Measuring National Income

Product Method

Income Method

Expenditure Method

1. Product Method or Value Added or Output approach

Under this method, we add the values of output produced or services rendered by the different sectors of the economy during the year in order to calculate the National Income.

In this method, we include only the value added by each firm in the production process in the output figure.
Hence, we use the value-added method. The value-added output of all the sectors of the economy is the GNP at factor cost. However, this method is unscientific as it adds the value of only those goods and services that are sold in the market or are available for sale in the market

2. Income Method or Factor incomes approach

Under this method, we add all the incomes from employment and ownership of assets before taxation received from all the production activities in an economy.

Thus, it is also the Factor Income method. We also need to add the undistributed profits of the private sector and the trading surplus of the public sector corporations.

However, we need to exclude items not arising from productive activities such as sickness benefits, interest on the national debt, etc.

3. Expenditure Method

This method measures the total domestic expenditure of the economy. It consists of two elements, viz. Consumption expenditure and Investment expenditure.

Consumption expenditure includes consumption expenditure of the household sector on goods and services and consumption outlays of the business sector and public authorities.

Investment expenditure refers to the expenditure on the making of fixed capital such as Plant and Machinery, buildings, etc.

Three Important Methods for Measuring National Income. There are three techniques to compute national income:
Income Method
product/ Value Added Method
Expenditure Method
1. Income Method: National income is calculated using this method as a flow of factor incomes. Labor, capital, land, and entrepreneurship are the four main components of production. Labour is compensated with wages and salaries, money is compensated with interest, the land is compensated with rent, and entrepreneurship is compensated with profit.Furthermore, certain self-employed individuals, such as doctors, lawyers, and accountants, use their own labour and capital. Their earnings are classified as mixed-income.
2. Product Method: In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.The money value is calculated at market prices so sum-total is the GDP at market prices. GDP at market price can be converted into by methods discussed earlier.
3. Expenditure Method: Factor income earned by factors of production is spent in the form of expenditure on purchase of goods and services produced by firms.
This method measures national income as sum total of final expenditures incurred by households, business firms, government and foreigners.
This total final expenditure is equal to gross domestic product at market price, i.e. ∑Final Expenditure = GDPMP.
This method is also known as ‘Income Disposal Method’.

NAME: CHUKWU BRIDGET OLACHINYERE
REG NO: 2020/248249
COURSE: ECO 102
DEPARTMENT: ECONOMICS
The national income of a country can be measured by three alternative methods namely;
1). Product method
2). The income method
3). The expenditure method
1). PRODUCT METHOD: In this method, national income is measured as a flow if goods and services. We calculate money value of all final goods and services produced in an economy during a year. Finish here refer to those goods which are directly consumed and not used in further production process.
Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise, there will be double counting of value of goods
2).THE INCOME METHOD: In a nation that produces GDP during a year, people earn income from their jobs. Thus the sum of all factor incomes is GDP by revenue method: wages and salaries (employee compensation) + rent + interest + benefit.
3). THE EXPENDITURE METHOD: In this method, national income is measured as a flow of expenditure. GDP is sum–total of consumption expenditure, government consumption, gross capital formation ( Government and Private ) and net exports ( Export — Import ).

NAME: OKORAFOR CHINONYEREM MGBO
MATRIC NUMBER:2020/242636
DEPARTMENT: ECONOMICS
COURSE CODE: ECO 102
COURSE TITLE: PRINCIPLES OF ECONOMICS

Methods of Measuring National Income:
All goods and services produced in the country must be counted and converted against money value during a year. Thus, whatever is produced is either used for consumption or for saving. Thus, national output can be computed at any of three levels, viz., production, income and expenditure. Accordingly, there are three methods that are used to measure national income. Namely:

1. Production or value added method
2. Income method or factor earning method
3. Expenditure method

And if these methods are done correctly, the following equation must hold
Output = Income = Expenditure.
This is because the three methods are circular in nature. It begins as production, through recruitments of factors of production, generating income and going as incomes to factors of production.

1. Product Method:
Product method measures the output of the country. It is also called inventory method. Under this method, the gross value of output from different sectors like agriculture, industry, trade and commerce, etc., is obtained for the entire economy during a year. The value obtained is actually the GNP at market prices. Care must be taken to avoid double counting.
The value of the final product is derived by the summation of all the values added in the productive process. To avoid double counting, either the value of the final output should be taken into the estimate of GNP or the sum of values added should be taken.

Precautions
The product method is followed in the underdeveloped countries, but it is less reliable because the margin of error in this method is large:
1. Double counting is to be avoided under value added method. Any commodity which is either raw material or intermediate good for the final production should not be included. For example, value of cotton enters value of yarn as cost, and value of yarn in cloth and that of cloth in garments. At every stage value added only should be calculated.
2. The value of output used for self consumption should be counted while measuring national income.
3. In the case of durable goods, sale and purchase of second hand goods (for example pre owned cars) should not be included.

2. Income Method (Factor Earning Method)
This method approaches national income from the distribution side. Under this method, national income is calculated by adding up all the incomes generated in the course of producing national product.
Steps involved:
1. The enterprises are classified into various industrial groups.

2. Factor incomes are grouped under labour income, capital income and mixed income.
a. Labour income – Wages and salaries, fringe benefits, employer’s contribution to social security.
b. Capital income – Profit, interest, dividend and royalty
c. Mixed income – Farming, sole proprietorship and other professions.

3. National income is calculated as domestic factor income plus net factor incomes from abroad.

In short,
Y = w + r + i + p + (X-M)
w = wages, r = rent, i = interest, p = profits,
X = Exports and M = Imports
This method is adopted for estimating the contributions of the remaining sectors, viz., small enterprises, banking and insurance, commerce and transport, professions, liberal arts and domestic service, public authorities, house property and foreign sector transaction.
Data on income from abroad (the rest of the world sector or foreign sector) are obtained from the account of the balance of payments of the country.

Precautions
While estimating national income through income method, the following precautions should be taken.

Items not to be included
1. Transfer payments are not to be included in estimation of national income as these payments are not received for any services provided in the current year such as pension, social insurance etc.
2. The receipts from the sale of second hand goods should not be treated as part of national income as they do not create new flow of goods or services in the current year.
3. Windfall gains such as lotteries are also not to be included as they do not represent receipts from any current productive activity.
4. Corporate profit tax should not be separately included as it has been already included as a part of company profit.

Items to be included
1. Imputed value of rent for self occupied houses or offices is to be included.
2. Imputed value of services provided by owners of production units (family labour) is to be included.

3. The Expenditure Method (Outlay method):
Under this method, the total expenditure incurred by the society in a particular year is added together. To calculate the expenditure of a society, it includes personal consumption expenditure, net domestic investment, government expenditure on consumption as well as capital goods and net exports. Symbolically,

GNP = C + I + G + (X-M)
C = Private consumption expenditure
I = Private Investment Expenditure
G = Government expenditure
X-M = Net exports

Precautions
1. Second hand goods: The expenditure made on second hand goods should not be included.
2. Purchase of shares and bonds : Expenditures on purchase of old shares and bonds in the secondary market should not be included.
3. Transfer payments : Expenditures towards payment incurred by the government like old age pension should not be included.
4. Expenditure on intermediate goods : Expenditure on seeds and fertilizers by farmers, cotton and yarn by textile industries are not to be included to avoid double counting. That is only expenditure on final products are to be included.

METHODS OF MEASURING NATIONAL INCOME

1. Income Approach (Income method): In using this method, account is taken of all the income received by individuals, firms, and the government within a year for their participation in production. The income received by the factors of production in the form of wages or salaries, rent, interest and profits is added together. To avoid double counting, transfer incomes or payments are not Included.
By using this approach, we arrive at either the G.N.P or G.D.P at factor cost. This is because the total figure is found by adding up the costs of the various factors of production.

2. Output or Net Product Approach: This methods sees national income in terms of the monetary value of all goods and services produced by the various economic units (individuals, firms and the government) in a year. In this method, national income is measured by adding together the value of the net contributions of the various sectors or enterprises (both private and public) in the country. To avoid double counting, income is measured on a value added basis. (Value added is the value of output less cost of inputs). In addition, the value of exports are included while the value of imports are subtracted. National Income derived in this way gives the G.D.P at market prices. To get the G.D.P at factor cost, we subtract taxes and add subsidies.

3. Expenditure Approach: This method of measuring national income measures the total expenditure on goods and services by the various economic units In a country. In using this approach, it is necessary to avoid double counting by identifying expenditures of a final nature. We include only expenditure on final goods and services. For example, in calculating the value of bread, which is a final consumption type of good, we shall take care not to add to the final price of the bread the prices of flour, sugar, yeast and other ingredients used in making bread.
In addition, transfer payments such as pensions paid to retired workers, gifts to beggars etc, are not included. The formula used for calculating national income using this approach is:
Y= C + I + G + (X – M) + P.
The use of this approach is based on the fact that all goods and services produced In a country can be considered as either final consumption or investment goods and services.

Methods of measuring national income
1) Gross Domestic Product(GDP): Dernberg defines GDP at market price as the market value of the output of final goods and services produced in the domestic territory of a country during an accounting year.
Three different ways of measuring GDP are; Product method, Income method and Expenditure method
2) National Domestic Product (NDP): This is the value of net output of the economy during the year. Thus, NDP= GDP at factor cost – Depreciation.
3) Gross National Product (GNP): This is the measure of the flow of goods and services at market value resulting from current production during a year in a country, including net income from abroad
4) Personal Income: This is the total income received by the individual of a country from all sources before payment of direct taxes in one year. Thus; Personal Income= Private income- undistributed corporate profit- profit taxes.
5) Disposable Income: This is the actual income which can be spent in consumption by individuals and families. Thus; Direct Income= Personal Income- direct taxes.

Okwudili Esther Mmesoma
2020/242613
Economics Department

METHODS OF MEASURING NATIONAL INCOME
1) Product method
2) Income method
3) Expenditure method

1). PRODUCT METHOD
In this method, all goods and services produced during the year in various industries are added up. This is also known as value-added to GDP or GDP at the sector of origin’s cost factor. Product method measures the output of the country. It is also called inventory method. Under this method, the gross value of output from different sectors like agriculture, industry, trade and commerce, etc., is obtained for the entire economy during a year. The value obtained is actually the GNP at market prices. Care must be taken to avoid double counting.
The value of the final product is derived by the summation of all the values added in the productive process. To avoid double counting, either the value of the final output should be taken into the estimate of GNP or the sum of values added should be taken.

2) INCOME METHOD
In a nation that produces GDP during a year, people earn income from their jobs. Thus the sum of all factor incomes is GDP by revenue method: wages and salaries (employee compensation) + rent + interest + benefit. This method approaches national income from the distribution side. Under this method, national income is calculated by adding up all the incomes generated in the course of producing national product.
Steps involved
A. The enterprises are classified into various industrial groups.
B. Factor incomes are grouped under labour income, capital income and mixed income.
i. Labour income – Wages and salaries, fringe benefits, employer’s contribution to social security.
ii. Capital income – Profit, interest, dividend and royalty
iii. Mixed income – Farming, sole proprietorship and other professions.
C. National income is calculated as domestic factor income plus net factor incomes from abroad. In short.
This method is adopted for estimating the contributions of the remaining sectors, viz., small enterprises, banking and insurance, commerce and transport, professions, liberal arts and domestic service, public authorities, house property and foreign sector transaction.
Data on income from abroad (the rest of the world sector or foreign sector) are obtained from the account of the balance of payments of the country.

3) EXPENDITURE METHOD
This approach focuses on products and services generated during one year within the region.
GDP is subtracted from the portion of consumption, investment, and government spending expended on imports. Likewise, all manufactured components, such as raw materials used in the manufacture of products for sale, are also exempt.
Thus GDP by expenditure method at market prices is net export, which can be positive or negative.
Under this method, the total expenditure incurred by the society in a particular year is added together. To calculate the expenditure of a society, it includes personal consumption expenditure, net domestic investment, government expenditure on consumption as well as capital goods and net exports. Symbolically,
GNP = C + I + G + (X-M)
C – Private consumption expenditure
I – Private Investment Expenditure
G – Government expenditure
X – Export
M – Import
X-M = Net exports.

Name: Nsude Onyinyechi Gift
Reg No:2020/245128
Gross Domestic Product (GDP):
GDP is the total value of goods and services produced within the country during a year. This is calculated at market prices and is known as GDP at market prices. Dernberg defines GDP at market price as “the market value of the output of final goods and services produced in the domestic territory of a country during an accounting year.”
There are three different ways to measure GDP:
Product Method, Income Method and Expenditure Method.
These three methods of calculating GDP yield the same result because National Product = National Income = National Expenditure.
1. The Product Method:
In this method, the value of all goods and services produced in different industries during the year is added up. This is also known as the value added method to GDP or GDP at factor cost by industry of origin. The following items are included in India in this: agriculture and allied services; mining; manufacturing, construction, electricity, gas and water supply; transport, communication and trade; banking and insurance, real estates and ownership of dwellings and business services; and public administration and defense and other services (or government services). In other words, it is the sum of gross value added.
2. The Income Method:
The people of a country who produce GDP during a year receive incomes from their work. Thus GDP by income method is the sum of all factor incomes: Wages and Salaries (compensation of employees) + Rent + Interest + Profit.
3. Expenditure Method:
This method focuses on goods and services produced within the country during one year.
GDP by expenditure method includes:
(1) Consumer expenditure on services and durable and non-durable goods (C),
(2) Investment in fixed capital such as residential and non-residential building, machinery, and inventories (I),
(3) Government expenditure on final goods and services (G),
(4) Export of goods and services produced by the people of country (X),
(5) Less imports (M). That part of consumption, investment and government expenditure which is spent on imports is subtracted from GDP. Similarly, any imported component, such as raw materials, which is used in the manufacture of export goods, is also excluded.
Thus GDP by expenditure method at market prices = C+ I + G + (X – M), where (X-M) is net export which can be positive or negative.
(B) GDP at Factor Cost:
GDP at factor cost is the sum of net value added by all producers within the country. Since the net value added gets distributed as income to the owners of factors of production, GDP is the sum of domestic factor incomes and fixed capital consumption (or depreciation).
Thus GDP at Factor Cost = Net value added + Depreciation.
GDP at factor cost includes:
(i) Compensation of employees i.e., wages, salaries, etc.
(ii) Operating surplus which is the business profit of both incorporated and unincorporated firms. [Operating Surplus = Gross Value Added at Factor Cost—Compensation of Employees—Depreciation]
(iii) Mixed Income of Self- employed.
Conceptually, GDP at factor cost and GDP at market price must be identical/This is because the factor cost (payments to factors) of producing goods must equal the final value of goods and services at market prices. However, the market value of goods and services is different from the earnings of the factors of production.
In GDP at market price are included indirect taxes and are excluded subsidies by the government. Therefore, in order to arrive at GDP at factor cost, indirect taxes are subtracted and subsidies are added to GDP at market price.
Thus, GDP at Factor Cost = GDP at Market Price – Indirect Taxes + Subsidies.
(C) Net Domestic Product (NDP):
NDP is the value of net output of the economy during the year. Some of the country’s capital equipment wears out or becomes obsolete each year during the production process. The value of this capital consumption is some percentage of gross investment which is deducted from GDP. Thus Net Domestic Product = GDP at Factor Cost – Depreciation.
(D) Nominal and Real GDP:
When GDP is measured on the basis of current price, it is called GDP at current prices or nominal GDP. On the other hand, when GDP is calculated on the basis of fixed prices in some year, it is called GDP at constant prices or real GDP.
Nominal GDP is the value of goods and services produced in a year and measured in terms of rupees (money) at current (market) prices. In comparing one year with another, we are faced with the problem that the rupee is not a stable measure of purchasing power. GDP may rise a great deal in a year, not because the economy has been growing rapidly but because of rise in prices (or inflation).
On the contrary, GDP may increase as a result of fall in prices in a year but actually it may be less as compared to the last year. In both 5 cases, GDP does not show the real state of the economy. To rectify the underestimation and overestimation of GDP, we need a measure that adjusts for rising and falling prices.
This can be done by measuring GDP at constant prices which is called real GDP. To find out the real GDP, a base year is chosen when the general price level is normal, i.e., it is neither too high nor too low. The prices are set to 100 (or 1) in the base year.
Now the general price level of the year for which real GDP is to be calculated is related to the base year on the basis of the following formula which is called the deflator index:

Suppose 1990-91 is the base year and GDP for 1999-2000 is Rs. 6, 00,000 crores and the price index for this year is 300.
Thus, Real GDP for 1999-2000 = Rs. 6, 00,000 x 100/300 = Rs. 2, 00,000 crores
(E) GDP Deflator:
GDP deflator is an index of price changes of goods and services included in GDP. It is a price index which is calculated by dividing the nominal GDP in a given year by the real GDP for the same year and multiplying it by 100. Thus,

It shows that at constant prices (1993-94), GDP in 1997-98 increased by 135.9% due to inflation (or rise in prices) from Rs. 1049.2 thousand crores in 1993-94 to Rs. 1426.7 thousand crores in 1997-98.
(F) Gross National Product (GNP):
GNP is the total measure of the flow of goods and services at market value resulting from current production during a year in a country, including net income from abroad.

1. Product Method:
ADVERTISEMENTS:
In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.
Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.
To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP.
ADVERTISEMENTS:
The money value is calculated at market prices so sum-total is the GDP at market prices. GDP at market price can be converted into by methods discussed earlier.
2. Income Method:
Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.
Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.
ADVERTISEMENTS:
3. Expenditure Method:
In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

Name: MUOKEBE CHIAMAKA
Reg no: 2020/244660
Dept:EDUCATION AND ECONOMICS
E-mail: faithc643@gmail.Com

Meaning of national income
NATIONAL INCOME
National income can be defined as the monetary aggregate of the current achievements of an economy, without any double counting. It is estimated, usually for one year. Therefore, it is net monetary value of all the goods and servicesproduced by the constituents of a national economy over a period of one year.
The measurement of production, income and expenditure flows with respect the normal residents of an economy gives us three methods of measuring national income of an economy.

Methods to Measure National Income
There are three methods to measure national income of an economy. These are:
1) production method or value added method,
2) income method, and
3) expenditure method.
Each of these methods corresponds to a flow taking place in the economy. These three methods are, in fact, three ways of looking at the same variable, nationa lincome. The statistical data and tools to measure national income by each of the three methods may be different but conceptually each of these will give the same result. If the different methods do not give us the same estimate of national income, it will be primarily because of lack of relevant statistical data required to measurenational income.

1.PRODUCTION METHOD

In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.
Basically, three steps are involved in applying the production method to compute the national income of an economy. These steps are:
1) to identify the producing enterprises and to classify them into industrial sectors according to their activities
2) to estimate net value added at factor cost of each producing enterprise within the domestic territory of an economy and to add up net value added by all the sectors to arrive at net domestic product at factor cost
3) to estimate net factor income from abroad, which has to be added to net domestic product at factor cost to arrive at net national product at factor cost/national income of an economy.
Classification of Industrial sectors
Broadly speaking, the industrial sectors are divided into three categories:

a) Primary Sector,
b) Secondary Sector, and
c) Tertiary or Services Sector.
Primary Sector: It includes agriculture and allied activities of forestry, fishing,mining and quarrying. This sector produces commodities by exploiting natural resources like coal, iron ore and other minerals. The primary sector is divided into: (i) agriculture, (ii) forestry and logging, (iii) fishing, and (iv) mining and quarrying.
Secondary Sector: It consists of the manufacturing sector. In India, the secondary sector is divided into: (i) registered manufacturing, (ii) unregistered manufacturing, (iii) construction, (iv) electricity, gas and water supply.
Tertiary Sector: It consists of the services. this sector comprises: (i) railways, (ii) transport by other means and storage, (iii) communications, (iv) trade,hotels and restaurants, (v) banking and insurance, (vi) real estate, ownership of dwellings and business services, (vii) public administration and defence and (viii) other services.

Estimation of Net Value Added

After the producing sectors of an economy are identified, the next step is to find out net value added of each of these sectors. The term value added refers to addition of value by a producing unit to raw materials and services (known as intermediate inputs) used in production. What a producer produces is termed as the output. Value added is the difference between the value of output and the cost of intermediate inputs.
It is also important to note that :
i) sum of gross value added at market price of all producing units gives us gross domestic product at market price;
ii) sum of gross value added at factor cost of all producing units gives us gross domestic product at factor cost;
iii) net domestic product at factor cost is estimated by adding net value added atfactor cost of all the producing units of an economy; and finally,
iv) net domestic product at market price is computed by summing up net value added at market price of all the producing units of an economy.

Net Factor Income from Abroad
The concept of net factor income from abroad has to be added to net domesticproduct at factor cost for getting the national income. It consists of
1) net compensation of employees,
2) net income from property and entrepreneurship, and
3) net retained earnings of resident companies abroad.

Net Compensation of Employees from Abroad
Net compensation of employees receivable from abroad is equal to the difference between compensation of employees received by resident employees who are living or employed abroad temporarily and compensation of foreign nationals working temporarily in the domestic economy. The clause temporary resident applies to those employees who stay abroad for less than one year. In case they stay for one year or more in a foreign country they would be treated as normal residents of that country and their income would be a part of the national income of the employer country. In such a situation, whatever remittances they send to their country would be treated as current transfers from abroad and will not form a part of the national income. Net compensation of employees, as it is defined, can be a positive or anegative value.

Net Income from Property and Entrepreneurship from Abroad
Net income from property and Entrepreneurship from abroad is the difference between the income received by way of interest, rent, dividend and profit by the resident producers of a country and payments of similar type made to the rest of the world. This also includes net interest received by the government on foreign loans.

Net Retained Earnings of Resident Companies Abroad
Retained earning refers to the undistributed profit of the companies. Residents companies abroad (i.e., companies belonging to one country and working in the domestic territory of some other country) retain a part of their profits for further
investment abroad. Likewise, foreign companies and their branches retain a part oftheir profits in the countries of their operation. The difference between retained earning of the foreign companies located in a country and retained earning of resident companies located abroad is equal to net retained earnings from abroad. Thus, net factor income from abroad is equal to net compensation of employees from abroad plus net property and entrepreneurship income from abroad plus net retained earning of resident companies abroad.

2. INCOME METHOD
Net value added at factor cost of a producing unit is identical to the sum of factor incomes – compensation of employees and operating surplus or mixed income of the self-employed entrepreneurs. So, we can sum up compensation of employees and operating surplus or mixed income of the self-employed to estimate national increase.If factor incomes generated by all the producing units within the domestic territory of an economy are added up, net domestic product at factor cost is arrived at.Further, if net factor income from abroad is added to net domestic product at factor cost of an economy, net national product at factor cost or national income of an economy can be estimated. Given net national product at factor cost if the depreciation provision is added to it, gross national product at factor cost is arrived at. If net indirect taxes are added to gross national product at factor cost, gross national product at market price can be calculated.
The main steps involved in estimating national income by the income method are:
1) to identify the producing enterprises, which use services of the factors of production
2) to classify various types of factor payments
3) to estimate various components of factor payments
4) to estimate net factor income from abroad, which has to be added to net domestic product at factor cost to arrive at net national product at factor cost or national income of an economy.There are a few points to be kept in mind while estimating national income by income method.
1) A distinction has to be made between factor and income transfer income. While factor incomes are earned by factors of production, transfer incomes are enjoyed by various economic agents without supplying factor services. It is only factor incomes that constitute national income. Accordingly, transfer incomes are excluded from national income of an economy.
2) The services of owner-occupied dwellings are equal to imputed rent of the dwelling. Imputed rent adjusted for maintenance expenditure of dwellings included in national income by production method.
3) Income earned by the act of smuggling or gambling as well as windfall gainslike lotteries are not included in the estimation of national income.
4) National Income of an economy includes direct taxes like income tax and
corporate tax. It may be useful to remember that compensation of employees includes income tax to be paid by them and are included in national income before deduction of corporate tax. Death duties, gift tax, wealth tax, etc., are supposed to be paid from the wealth or past savings of those persons who pay these taxes and not out of current income. Therefore, such taxes are not included in the estimation of national income.
5) Sale and purchase of second-hand goods are not included in national income of an economy. The sale proceeds of second-hand goods received by a person do not relate to any service rendered and, therefore, do not constitute a part of national income.

3. EXPENDITURE METHOD
Income generated in the process of production is received by factors of production.Such income can be divided into two parts viz., (a) income from work and (b)income from ownership of capital and entrepreneurship. Incomes from work are enjoyed by the workers while those of ownership of entrepreneurship are enjoyed by their owners. The income earned by factors of production is either saving.Savings generated, in turn, are used for adding to the capital stock or what is called investment. If the final consumption and gross investment expenditure of all economic agents including the rest of the world are added up, this gives us the gross domestic product at market price for an economy. From the GDP at market price, we deduct depreciation provision and net indirect taxes to get net domestic product at factorcost. Add net factor income from abroad to net domestic product at factor cost to get net national product at factor cost (or national income) of an economy. Various components of final expenditures constituting gross domestic product at market price are:
1) private final consumption expenditure,
2) government’s final consumption expenditure,
3) gross domestic fixed capital formation,
4) change in stock, and
5) net export of goods and services.

Private Final Consumption Expenditure
Private final consumption expenditure is defined as the expenditure on current account of resident and non-resident households in the domestic market and on profit-making bodies serving households. The expenditure, here, relates to outlays on new durable as well as non-durable goods (except land) and on services net of sales (sales less purchases) of second-hand goods, scrap and wastes
Government Final Consumption Expenditure
Government final consumption expenditure is defined as the current expenditure on goods and services used up in providing services of government administrative departments less the sales by them. Here, we are considering the services rendered by general government which consists of all departments, offices, organizations and other bodies, which are agencies or instruments of the Centre, state or local public authorities, financed by budgets or extra budget funds. Government enterprises,public corporations and departmental enterprises are excluded from it.

Gross Domestic Fixed Capital Formation
Gross fixed capital formation consists of the outlays of industries, producers of government services and producers of private non-profit services to households, on addition of new durable goods to the stocks of fixed assets less net sales of similar second-hand and scrapped goods. The outlays of government services on durable goods for military use are excluded from gross fixed capital formation. In it, outlays on the improvement of land, on the development and extension of timber tracts,Plantations etc., are included, provided they take more than one year to become productive. Outlays by households on residential constructions are also included in gross fixed capital formation. Gross fixed capital formation is inclusive of the consumption of fixed capital. Net fixed capital formation is defined as gross fixed capital formation less the consumption of fixed capital.

Change in Stocks
Stocks consists largely of materials and supplies, work-in-progress (except construction projects) and finished products in the possession of industries. Standing timber and crops are not included in stocks, but livestock raised for slaughter, logsand harvested crops are. Change in stocks is the difference between markets or book values of the stocks in the beginning and at the end of the year.Stocks are classified according to the kind of economic activity of the owner or according to type of the items concerned. Classification also provides for (a)stocks of newly produced and imported goods classified according to industries which normally produce these goods, (b) stocks of second hand goods classified according to the type of goods, and (c) stocks of scrap and wastes, classified according to the type of material.
The physical change in stocks has to be multiplied by the market prices to get the value of change in stocks.

Net Export of Goods and Services
Net export of goods and services is the difference between value of export and
import of goods and services over a year. Accordingly, net export can be positive or negative, positive when exports are more than imports, and negative when reverse is the case.

In Nigeria, export of goods and services is defined as all transfers of the ownership of goods from residents of the country to non-residents and services provided by resident producers of the country to non-residents. If exports are recorded by the custom authorities, they may consist of the outward movement of merchandise across the customs frontiers of country and of other goods across the boundaries of her domestic territory, including the direct purchases in the country of extra￾territorial organizations and non-resident person

Name: EZE FAITH CHIOMA
Reg no: 2020/242584
Department: Economics
METHODS OF MEASURING NATIONAL INCOME
* Product method
* Income method
* Expenditure method
PRODUCT METHOD: In this method national income is a measured as a flow of goods and services. It calculate money value of all final goods and services produced in an economy during a year. Final goods which are directly consumed and not user in further production process.

INCOME METHOD: under this method national income is measured as a flow of factor incomes. There are four factors of production land, labour, capital and entrepreneurship. Labour here wages and salary, capital gets intereste, land gets rents and entrepreneurship gets profit as their remuneration.

EXPENDITURE METHOD: in this method, national income is measured as a flow of expenditure. GDP is the sum total of private expenditure. Government consumption expenditure, gross capital formulation ( government and private) and net exports (exports – import)

Name: Onuoha Chijindu
Reg No: 2020/249380
Email: chijindub747@gmail.com

The various methods of measuring National income are:
(1) The product method
(2) The income method
(3) The expenditure method
Explanations of the above:

(1)The Product Method:
In this method, the value of all goods and services produced in different industries during the year is added up. This is also known as the value added method to GDP or GDP at factor cost by industry of origin.
Here, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.
Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.
To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP.

(2) The Income Method:
The people of a country who produce GDP during a year receive incomes from their work. Thus GDP by income method is the sum of all factor incomes. There are generally four factors of production: labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.
Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.

(3) Expenditure Method:
In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).
This method focuses on goods and services produced within the country during one year.
GDP by expenditure method includes:
(i) Consumer expenditure on services and durable and non-durable goods (C),
(ii) Investment in fixed capital such as residential and non-residential building, machinery, and inventories (I),
(iii) Government expenditure on final goods and services (G),
(iv) Export of goods and services produced by the people of country (X),
(v) Less imports (M). That part of consumption, investment and government expenditure which is spent on imports is subtracted from GDP. Similarly, any imported component, such as raw materials, which is used in the manufacture of export goods, is also excluded.
Thus GDP by expenditure method at market prices = C+ I + G + (X – M), where (X-M) is net export which can be positive or negative.

NAME: ONUIGBO ADAEZE JENNIFER
REG NO: 2020/ 242608
EMAIL ADDRESS: ADAEZEONUIGBO15@GMAIL.COM

METHODS OF MEASURING NATIONAL INCOME.
They are ;
1. Product or value added method
2. Income or factor earning method.
3. Expenditure method.

PRODUCT METHOD:
In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.

To avoid the problem of double counting we can use the value-addition method in which not the whole value of a commodity but value-addition (i.e. value of final good value of intermediate good) at each stage of production is calculated and these are summed up to arrive at GDP.
This method measures the output of the country. Under this method, the gross value of output from different sectors like agriculture, industry, trade and commerce, etc is determined for the entire economy during a year. The value obtained is actually the GNP at market prices. Care must be taken to avoid double counting.

2. INCOME METHOD:
Under this method, national income is measured as a flow of factor incomes. National income is calculated by adding up all the incomes generated in course of producing national product. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.
Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.

3. EXPENDITURE METHOD:
In this method, national income is measured as a flow of expenditure, the total expenditure incurred by the society in a particular year is added together. GDP is sum – total of private consumption expenditure, Government consumption expenditure, Investment expenditure, gross capital formation (Government and private) and net exports (Export-Import).

Samuel Ozoemenam Caleb
2019/245901
Science laboratory technology
ozoemenamcaleb128@gmail.com
Methods for Measuring National Income

The following points highlight the three methods for measuring national income. The methods are: 1. The Product (Output) Method 2. The Income Method 3. The Expenditure Method.

1. The Product (Output) Method:

The most direct method of arriving at an estimate of a country’s national output or income is to add the output figures of all firms in the economy to get the total value of the nation’s output. The outputs can be grouped into certain product categories corresponding to industries or to sectors (such as the primary sector, secondary sector and the tertiary sector.

2. The Income Method:

The second approach is to measure incomes generated by production. The main items of income are shown in Table 1.

Income from employment (item no. 1 in the Table) is wages and salaries. Income of self-employed persons (item number 2) includes both wages and return on capital owned by self-employed persons (who are treated as firms in microeconomics). Item number 3 is to be interpreted in a broad sense. It includes not only the rent of land but also the rent of buildings, plus royalties earned from patents and copyrights. Thus, it is a partly of return to land and partly a return to capital. Item number 4 is the major part of return on capital to the private sector.

Likewise, item number 5 is the major part of the return to capital for the public sector. Item number 6 is depreciation which is the reduction in the value of capital goods due to their contribution to the production process. Depreciation or capital consumption allowance represents that part of the value of output which is not earned by any factor but is the value of capital used up in the process of production. This depreciation is to be treated as part of the gross return on capital.

3. The Expenditure Method:

From the expenditure side national income is calculated by adding up the flows of expenditure needed to purchase the nation’s output. However, while estimating the value of national product by the expenditure method we must only record final expenditures.

We have to exclude all the expen­diture on intermediate goods and services. While measuring national in­come total final expenditure (TFE) is divided into four broad categories: consumption, investment, government expenditure (spending), exports and imports. These four components may now be further developed.

Dept:philosophy
Reg no:2020\247920
1.Production method
2.Income method
3.Expenditure method
Production methods are the way to manage how your product or your suppliers products are produced .each method is made up of a set of production steps .productions steps are the series is steps involved in producing a product. For example, you may choose a step to “up load files into the printer ” or “check ink levels”
Their are four types of production
Unit or job type of production
Batch type of production
Mass production or flow production
Continuous production or process production
INCOME METHODS
income method measures national income from the perspective of factors incomes. Under this method, incomes received by all the residents of a year are added up to obtain the national income. According to this method ,all the income that accrue to the factors of production by way of wages profit,rent,interest, etc are summed up to obtain the national income. Income method is also known as disturbutive share method or factor payment methods
COMPONENTS OF FACTORS OF INCOME
The sum total of all the factor incomes earned within the domestic territory of a country is known as domestic income (NDPFC)system of national account (SNA)1993 (joint publication of united nations and world Bank )has elaborated the following
THE EXPENDITURES
The expenditure method is one of the effective ways of national income accounting in which the measurement of the same is taken as a flow of expenditure from government consumption net exports and gross capital formation
THE FORMULA IS
NATIONAL INCOME =C+G+I+NC
WHILE
house hold consumption is represented by c
Government expenditures is represented by G
Investment expense is rep by I
Net exports are represented by Nx

Name;Ani Chinenye Christianah
Falcuty; Social science
Department; Philosophy
Reg;2020/247806

National Income measurements
National Income accounts are fundamental aggregate statistics in Macro-Economics analysis.It is the total Market value of product in a country’s economy during a year. National Income can be measured alternatively and equivalently in three ways, namely; product method, income methods and Expenditure method.
First income method,in this method,national Income is measured as a flow of goods and services,here the total money value of all final goods and services produced in an economy during a year are being calculated.Final goods here refers to those goods which are directly consumed and not used in further production process while goods which are used in production process are called intermediate goods.
In the value of final goods,value of intermediate goods are already included therefore we do not count value of goods and to avoid double counting,the value addition method in which not the whole value of commodity but value -addition,value of final good plus value of intermediate good and it is calculated at each stage of production,then summed up and arrive at GDP,Gross Domestic Products.The money value is calculated at Market prices so sum total is the GDP at market price.
Another method is the income method,under this method, national Income is increased as a flow of factors of income.They are generally four factors of production which are land, capital and entrepreneurship.where labour gets wages and salaries, capital gets interest,land is rent and entrepreneur get profits as their remuneration.Some self employed persons who employ labour and capital such as doctors, advocates and so on.This set of people income is called mixed income where sum total of all these factors income is called NDP at factor costs.
Lastly, Expenditure method,here national Income is measured as a flow of expenditure.GDP is sum-total of private consumption expenditure,gross capital formation.The Expenditure incurred by the society in particular is added together thus,GNP =C+I+G+(X-M)
Where C=private consumption
I= Private Investment Expenditure
G= Government Expenditure
And x-M = Net export.

1. Income national income
2. Product national income
3. Expenditure national income
1.Income national income: Is the sum up of all the factor incomes generated in the process of production
2.Product national income: it involves measuring the output of all producers and to deduct from this the total intermediate purchase.
3. Expenditure national income: this involves drawing a distinction between final and intermediate purchases and transaction.

Sunday Daniel chimaobi
mullerjackson344@gmail.com
2020/247287

Definition of national income

The definitions of national income can be grouped into two classes: One, the traditional definitions advanced by Marshall and
Pigou and two, modern definitions.According to Marshall: “The labour and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. This is the true net annual income or revenue of the country or national dividend.” In this definition, the word ‘net’ refers to deductions from the gross national income in respect of depreciation and wearing out of machines. And to this, must be added income from abroad.
The Pigouvian Definition:
A.C. Pigou has in his definition of national income included that income which can be measured in terms of money. In the words of Pigou, “National income is that part of objective income of the community, including of course income derived from abroad which can be measured in money.

There are 3 Methods of measuring the national income , methods are:
1 The product (output) method
2 The income method
3 The expenditure method

Explanation:
1. The Product (Output) Method:
The most direct method of arriving at an estimate of a country’s national output or income is to add the output figures of all firms in the economy to get the total value of the nation’s output. The outputs can be grouped into certain product categories corresponding to industries or to sectors (such as the primary sector, secondary sector and the tertiary sector)

2.The Income Method measures national income from the side of payments made to the primary factors of production in the form of rent, wages, interest and profit for their productive services in an accounting year.
The income approach is an evaluation methodology used for real estate estimation, which is computed by dividing the capitalisation tariff or price by the net operating income of the rental payments. Investors use this computation to value properties based on their profitability.

3. The Expenditure Method:
From the expenditure side national income is calculated by adding up the flows of expenditure needed to purchase the nation’s output. However, while estimating the value of national product by the expenditure method we must only record final expenditures.

We have to exclude all the expen­diture on intermediate goods and services. While measuring national in­come total final expenditure (TFE) is divided into four broad categories: consumption, investment, government expenditure (spending), exports and imports. These four components may now be further developed.

Name : MBA IBE
Reg.No: 2020/247526
Department : PHILOSOPHY
Course : ECONOMICS
Course Code: ECO 102

National income means the value of goods and services produced by a country during a financial year. Thus, it is the net result of all economic activities of any country during a period of one year and is valued in terms of money. National income is an uncertain term and is often used interchangeably with the national dividend, national output, and national expenditure.

METHODS OF MEASURING THE NATIONAL INCOME.
There are three ways of measuring the National Income of a country. They are from the income side, the output side and the expenditure side.
1. Product Method
2. Income Method
3. Expenditure Method

1. PRODUCT METHOD
Under this method, we add the values of output produced or services rendered by the different sectors of the economy during the year in order to calculate the National Income.
In this method, we include only the value added by each firm in the production process in the output figure.
Hence, we use the value-added method. The value-added output of all the sectors of the economy is the GNP at factor cost.
However, this method is unscientific as it adds the value of only those goods and services that are sold in the market or are available for sale in the market.

2. INCOME METHOD
Under this method, we add all the incomes from employment and ownership of assets before taxation received from all the production activities in an economy.
Thus, it is also the Factor Income method. We also need to add the undistributed profits of the private sector and the trading surplus of the public sector corporations.
However, we need to exclude items not arising from productive activities such as sickness benefits, interest on the national debt, etc

3. EXPENDITURE METHOD
This method measures the total domestic expenditure of the economy. It consists of two elements, viz. Consumption expenditure and Investment expenditure.
Consumption expenditure includes consumption expenditure of the household sector on goods and services and consumption outlays of the business sector and public authorities.
Investment expenditure refers to the expenditure on the making of fixed capital such as Plant and Machinery, buildings, etc.

NAME: MBADIHE LUCY CHIDERA
REG NO: 2020/242899
DEPARTMENT: COMBINED SOCIAL SCIENCE (ECONOMICS/PHILOSOPHY)
FACULTY OF SOCIAL SCIENCE
EMAIL: luhcey@gmail.com
TOPIC: METHOD OF MEASURING NATIONAL INCOME
DEFINITION OF NATIONAL INCOME
National income may be defined as the total monetary value of all goods and services and the total income earned in a given country over a period of time, usually a year.
In calculating national income, all payments made to all the factors of production (land,labour,capital and entrepreneur)are taken care of, the personal receipts of all workers who produce the GNP,etc.National income is therefore measured in terms of money.
METHODS OF MEASURING THE NATIONAL INCOME
There are basically three basic methods to measure national income of an economy.These are output method, income method and expenditure method .
1. Output (value added) Method
The output method of measuring the national income involves summing up the market value of all output of the economy sector by sector .
Problems associated with output method
A the problem of double counting
B difficult in measuring subsistence output
C difficult in estimating rental value of owner occupied houses .
The income method
This method of calculating national income adding up incomes earned by all factors of production used to produce national output in a particular period.
The expenditure method
This method measures the total expenditure on goods and services I.e on consumption and investment made by individuals, firms and government during the year. In order to avoid double counting, expenses on goods and services used in production are excluded in the measurement.
Symbolically, Y=C+I+G+[X-M] or
Y=C+I+G+Xa .

Name : Agu Juliet Ebube
Reg number : 2020/243122
Department : philosophy
Email : Juliet.agu.243122@unn.edu.ng

METHODS OF MEASURING NATIONAL INCOME
We have three methods of measuring national income

1. Production or value added method

2. Income method or factor earning method

3. Expenditure method

And if these methods are done correctly, the following equation must hold

Output = Income = Expenditure

This is because the three methods are circular in nature. It begins as production, through recruitments of factors of production, generating income and going as incomes to factors of production.

1. Product Method
Product method measures the output of the country. It is also called inventory method. Under this method, the gross value of output from different sectors like agriculture, industry, trade and commerce, etc., is obtained for the entire economy during a year. The value obtained is actually the GNP at market prices. Care must be taken to avoid double counting.

The value of the final product is derived by the summation of all the values added in the productive process. To avoid double counting, either the value of the final output should be taken into the estimate of GNP or the sum of values added should be taken.

In India, the gross value of the farm output is obtained as follows :

(i) Total production of 64 agriculture commodities is estimated. The output of each crop is measured by multiplying the area sown by the average yield per hectare.

(ii) The total output of each commodity is valued at market prices.

(iii) The aggregate value of total output of these 64 commodities is taken to measure the gross value of agricultural output.

(iv) The net value of the agricultural output is measured by making deductions for the cost of seed, manures and fertilisers, market charges, repairs and depreciation from the gross value.

Similarly, the gross values of the output of animal husbandry, forestry, fishery, mining and factory establishments are obtained by multiplying their estimates of total production with market prices. Net value of the output in these sectors is derived by making deductions for cost of materials used in the process of production and depreciation allowances, etc. from gross value of output.

Net value of each sector measured in this way indicates the net contribution of the sector to the national income.

Precautions
The product method is followed in the underdeveloped countries, but it is less reliable because the margin of error in this method is large. In India, this method is applied to agriculture, mining and manufacturing, including handicrafts.

a. Double counting is to be avoided under value added method. Any commodity which is either raw material or intermediate good for the final production should not be included. For example, value of cotton enters value of yarn as cost, and value of yarn in cloth and that of cloth in garments. At every stage value added only should be calculated.

b. The value of output used for self consumption should be counted while measuring national income.

c. In the case of durable goods, sale and purchase of second hand goods (for example pre owned cars) should not be included.

2. Income Method (Factor Earning Method)
This method approaches national income from the distribution side. Under this method, national income is calculated by adding up all the incomes generated in the course of producing national product.

Steps involved
1. The enterprises are classified into various industrial groups.

2. Factor incomes are grouped under labour income, capital income and mixed income.

a. Labour income – Wages and salaries, fringe benefits, employer’s contribution to social security.

b. Capital income – Profit, interest, dividend and royalty

c. Mixed income – Farming, sole proprietorship and other professions.

3. National income is calculated as domestic factor income plus net factor incomes from abroad. In short,

Y = w + r + i + π + (R-P)

w = wages, r = rent, i = interest, π = profits,

R = Exports and P = Imports

This method is adopted for estimating the contributions of the remaining sectors, viz., small enterprises, banking and insurance, commerce and transport, professions, liberal arts and domestic service, public authorities, house property and foreign sector transaction.

Data on income from abroad (the rest of the world sector or foreign sector) are obtained from the account of the balance of payments of the country.

Precautions
While estimating national income through income method, the following precautions should be taken.

Items not to be included
a. Transfer payments are not to be included in estimation of national income as these payments are not received for any services provided in the current year such as pension, social insurance etc.

b. The receipts from the sale of second hand goods should not be treated as part of national income as they do not create new flow of goods or services in the current year.

c. Windfall gains such as lotteries are also not to be included as they do not represent receipts from any current productive activity.

d. Corporate profit tax should not be separately included as it has been already included as a part of company profit.

Items to be included
i. Imputed value of rent for self occupied houses or offices is to be included.

ii. Imputed value of services provided by owners of production units (family labour) is to be included.

iii .The Expenditure Method (Outlay method)
Under this method, the total expenditure incurred by the society in a particular year is added together. To calculate the expenditure of a society, it includes personal consumption expenditure, net domestic investment, government expenditure on consumption as well as capital goods and net exports. Symbolically,

GNP = C + I + G + (X-M)

C – Private consumption expenditure

I – Private Investment Expenditure

G – Government expenditure

X-M = Net exports

Precautions

1. Second hand goods: The expenditure made on second hand goods should not be included.

2. Purchase of shares and bonds : Expenditures on purchase of old shares and bonds in the secondary market should not be included.

3. Transfer payments : Expenditures towards payment incurred by the government like old age pension should not be included.

4. Expenditure on intermediate goods : Expenditure on seeds and fertilizers by farmers, cotton and yarn by textile industries are not to be included to avoid double counting. That is only expenditure on final products are to be included.

National Income (NNPFC) = Gross Value Added by all the production Enterprises within the Domestic Territory of the Country – Depreciation – Net Indirect Taxes + Net Factor Income from Abroad

[Where, Net Indirect Taxes = Indirect tax – Subsidies]

[Gross Value Added = Value of Output – Intermediate Consumption] Value of Output = Sales + Change in Stock

Where, Change in Stock = Closing Stock – Opening Stock

Note: If entire out put is sold within the year, then value of output will be equal to sales itself.

or

Value of Output = Price x Quantity Sold

GDPMP = Private Final Consumption + Government Final Consumption Expenditure + Gross Domestic Capital Formation + Net Exports (Exports – Imports)

julietsobe512@gmail.com
List and deeply explain the various methods of measuring the national income.
The method of measuring the national income includes:
1. Income method is that method which measures national income in terms of payments made in the form of wages, rent , interest and profit. Factor income are earned income, transfer payment are unearned. Factor incomes are rewards for rendering factor services.
There are generally four factors of production: labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneur gets profit as their remuneration. The sun total of all these factors income is called NDP at factor costs.
2. Expenditure method: National expenditure in a closed economy is the sum of nation’s consumption and its investment.
However, in an open economy having foreign trades adjustments will have to be made for imports and exports.
GDP is sum total of private consumption expenditure, government expenditure, gross capital formation and net exports.
Y = C+ I + G+ (X-M)
3. Output method: In this method, a country’s national income can be calculated by adding the output of all the firms in the economy to determine the nation’s output.
Output method is also known as product method or value added method. The output method is the most direct method of arriving at an estimate of a country’s national output or income. It measures the results achieved and value transferred to a customer. For instance, miles of railroad track completed is an output measure that informs the railroad company of its progress toward completion of railroad line.

Name: ogechukwu Uzoigwe kosiso
Dept: economics
Reg number: 2020/242627
Topic: methods of measuring national income.

The methods of measuring National income include;
Product method
Also known as the value-added method, the product method is based on the net value added to the product at every stage of production. In the product method, the economy is usually divided into different industry sectors, such as fishing, agriculture, and transport.

The national income is calculated by adding the total output of the companies in the economy. The method shows the contribution of each sector to the national income, hence demonstrating the importance of different sectors relative to each other.

2. Income method
In the income method, the national income is measured by adding up the pretax income generated by the individuals and companies in the economy. It consists of income from wages, rent of buildings and land, interest on capital, profits, etc. in an accounting year. The income method shows the national income distribution among different earning groups in the economy.

3. Expenditure method
In the expenditure method, the national income is measured by adding up the expenditures made by individuals, companies, and the government. Thus, it combines consumer spending, investments made by companies, net exports, and government spending to calculate the national income.

Name:Ayogu madeliene ukamaka
Department: Economics
Reg:2020/242568
Email: ukamakamadeleine@gmail.com

The national income of a country can be measured by three alternative methods: (i) Product Method (ii) Income Method, and (iii) Expenditure Method .
1. Product Method
In this method, national income is measured as a flow of goods and services. We calculate money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.Goods which are further used in production process are called intermediate goods. In the value of final goods, value of intermediate goods is already included therefore we do not count value of intermediate goods in national income otherwise there will be double counting of value of goods.In this method,the economy is usually divided in to different industry sector such as fishing, agriculture and transport.It is calculated by adding total output of the companies in the economy.
2. Income Method:
Under this method, national income is measured as a flow of factor incomes. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.
Besides, there are some self-employed persons who employ their own labour and capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total of all these factor incomes is called NDP at factor costs.It is calculated by adding up pretax income generated by individuals and companies in the economy.it consists of income from wages,rents of buildings and land, interest on capital,profit e t.c
3. Expenditure Method:
In this method, national income is measured as a flow of expenditure. GDP is sum-total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).The expenditure method formula for national income is C+I+G(x-m)where consumer spending is denoted by C, Investment by I,then government spending by G.x stands for export and import is represented by m.

NAME; ALOKA ANITA NNEKA
REG NUMBER;2020/242953
DEPARTMENT; COMBINED SOCIAL SCIENCE (ECONOMICS/PSYCHOLOGY)
EMAIL; alokaanita@gmail.com
National income refers to the monetary value over a period of time of the output flow of goods and services produced in an economy.
Three Important Methods for Measuring National Income
There are three techniques to compute national income:
Income Method
Product/ Value Added Method
Expenditure Method