Measurement Of National Income — Flashcards
ICSE · Class 12 · Economics
40 flashcards for Measurement Of National Income (ICSE Class 12 Economics) to test yourself on key terms and facts.
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What are the three methods of measuring national income?
Answer
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.
What is the Product Method also called?
Answer
The Product Method is also called the Value Added Method. It is also known as the net output method or industrial origin method.
Define value added.
Answer
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 …
Why is value added important in national income measurement?
Answer
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…
What is the formula for value added?
Answer
Value Added = Value of Output - Non factor inputs. Non-factor inputs are intermediate goods and services bought from other firms.
What is value of output?
Answer
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…
How is change in stock calculated?
Answer
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.
What is the difference between value of output and value added?
Answer
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 …
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