Wednesday, August 08, 2012

How to calculate national income

For calculating National income, these step and thinking must be followed ----------
We know, there are three method to calculate national income
Expenditure method
Income method
Output/value added method
In these three methods, we see the difference only in calculating GDP. The next steps are quite same on all those method.
In expenditure method,
GDP (at market price) =personal consumption expenditure + gross domestic private investment + Govt. purchase of goods & services. = C+I+G
GNP (at factor cost) =C+I+G+(X-M)-Indirect business tax+ Subsidies
C= Expenditure on final goods and services- second hand goods- Expenditure on illegal goods + Commission spent on buying a second-hand goods.
I= Net domestic fixed capital formation (Expenditure on purchasing land, factories, flats, office, machinery, commission, legal charges) + depreciation + Change in stock
G= Housing allowance of civil servants + Medical allowance of civil servants + Expenditure on building new airport - Transfer Payment/Public Assistance
X - M = Domestic Exports of goods + Re-exports of goods + Exports of Services - Imports of Goods - Imports of Services.

national income accounting

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