Using The INCOME APPROCH/METHOD in the Measurement of National Income

May 1st, 2009 Comments off
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There are three (3) basic approaches or method in measuring national income namely:-

  1. Income approach
  2. Expenditure approach
  3. Output/Product approach

Below summarizes the INCOME APPROACH/METHOD in computing or measuring national income:

INCOME APPROACH

· Calculates GDP by summing up the incomes received by producers including profits and taxes paid to the government. The key part to this approach is national income

· National income is the total money value of all income received by persons and enterprises in the country during a year.

  • Components using this Income approach:

Wages and Salaries

+

Interests and dividends

+

Rent

+

Profits(including undistributed profits and income from self-employment)

=

Gross Domestic Income at factor costs(fc)

Income paid abroad

+

Income received from abroad

=

Gross national income at fc

Depreciation or Capital consumption

=

Net National Income at fc

=

National Income

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Financial Accounting

 
 

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