Q1Managerial Economics & Financial Accounting
Question
4 marks
Define National Income. Explain steps involved in the estimation of national income by income method. (1+3=4)
Answer
National income is total value produced. The income method sums up factor payments (wages, rent, interest, profit) to find it.
National Income: The total monetary value of all final goods and services produced within a country in a year plus net factor income from abroad.
Steps (Income Method): 1. Classify production units. 2. Estimate factor incomes (Compensation of employees, Rent, Interest, Profit, Mixed Income) to find Domestic Income (). 3. Add Net Factor Income from Abroad (NFIA) to arrive at National Income.