There are three (3) basic approaches or method in measuring national income namely:-
- Income approach
- Expenditure approach
- Output/Product approach
Below summarizes the INCOME APPROACH/METHOD in computing or measuring national income:
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INCOME APPROACH
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· 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.
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- Components using this Income approach:
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Wages and Salaries
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+
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Interests and dividends
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+
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Rent
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+
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Profits(including undistributed profits and income from self-employment)
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=
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Gross Domestic Income at factor costs(fc)
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–
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Income paid abroad
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+
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Income received from abroad
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=
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Gross national income at fc
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–
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Depreciation or Capital consumption
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=
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Net National Income at fc
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=
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National Income
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