Measurement Of National Income

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The three methods are: Product Method, Income Method, and Expenditure Method. All three methods give the same value of national income, but each looks at the economy from a different angle.

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The Product Method is also called the Value Added Method. It is also known as the net output method or industrial origin method.

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Value added is the difference between the value of output and intermediate consumption. It shows the new value created by a firm during production. For example, if a firm buys inputs from other firms …

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Value added avoids double counting. If the value of raw material, semi-finished goods, and final goods is all added separately, the same item may be counted more than once. Value added counts only the…

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Value Added = Value of Output - Non factor inputs. Non-factor inputs are intermediate goods and services bought from other firms.

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Value of output is the money value of all goods and services produced by a firm at current prices. It can be measured as Price × Quantity, or Sales + Change in Stock. It is gross because it includes d…

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Change in Stock = Closing Stock - Opening Stock. If closing stock is higher than opening stock, the difference is positive and shows unsold current production added to stock.

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The basic difference is intermediate consumption. Value of output includes intermediate consumption, while value added excludes it. Value of output shows total market value of production, while value …