2.4 Computation of National Income: Product Method, Income Method and Expenditure Method

Chapter Notes (Chapter को full Notes)
TU Solution(Extra questions सहित)

… Hey there! Welcome to the fourth lesson of Unit 2. In this lesson, we will be covering the Computation of National Income through Product Method, Income Method and Expenditure Method. As usual, I ask you to carefully study all these notes and think aloud or write down what you’ve learnt for effective memory. So, let’s get started.

हुन्छ Sir …..अब सुरु गरिहालौं!

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Computation of National Income: Product Method, Income Method and Expenditure Method

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Q) What components do you include while computing GNP at market price by income method?

→ We know that GNP = GDP + Net factor income from abroad. This is the GNP at market price. Following are the components that are included while computing GNP at market price by income method.
a. Compensation of employees
b. Rent
c. Interest
d. Profit
e. Mixed income
f. Net indirect taxes
g. Depreciation
and
h. Net factor income from abroad

Q) What components do you include while computing GNP at factor cost by income method?

→ We know that GNP = GDP + Net factor income from abroad. This is the GNP at market price. If we have to calculate the GNP at factor cost, we need to deduct the Net indirect taxes from the GNP at market price. Following are the components that are included while computing GNP at factor cost by income method.
a. Compensation of employees
b. Rent
c. Interest
d. Profit
e. Mixed income
f. Depreciation
and
g. Net factor income from abroad

Q) What components do you include while computing GDP at market price by expenditure method?

→ While computing GDP at market price by expenditure method, we include the following components:
a. Consumption expenditure
b. Investment expenditure
c. Government expenditure
d. Net exports

Q) What is meant by double counting?

→ Double counting means counting the value of the same product more than once.. Because of this, the calculation of national income becomes inaccurate.

Q) What is meant by Net factor income from abroad?

→ The income obtained from the citizens of the country, who are working abroad is called Net Factor Income from Abroad (NFIA). Net factor income from abroad is equal to the income received by citizens working abroad minus income paid to the foreigners working in our country.

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Note: All possible question-topics that can be asked in this group are already discussed earlier in Group B. Therefore, relax now and move on to the next lesson!

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