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  Calculation of National Income Homework Help

Methods of Calculation

1. Output/Product Method

• National Income is derived from adding only the money value of all final goods and services produced by firms.

• All intermediate goods are excluded.

2. Expenditure Method are described as follows

• National Income is derived from adding the total money value spent on consuming final goods and services by different sectors of the economy.

• Expenditure by government that does not give rise to production of goods and services such as pension and unemployment benefit must be excluded.

3. Income Method

• National Income is derived from adding the income received by owners of factors of production.

• Any trading surplus from public enterprises (e.g. water supply) must also be included.

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