Professional Documents
Culture Documents
CONCEPTS OF NATIONAL
INCOME
Product
has
the
following
Thus,
Personal Income = National Income Social
security
contributions
Corporate income taxes
Undistributed profits +
transfer
payments
Difficulties in the
Measurement of National
The first problem Income
relates to the treatment of nonmonetary transactions such as the services of
housewives to the members of their families and
farm output consumed at home.
Difficulties in
Measurement in
One major problem is the prevalence of nonDeveloping
monetised
transactions. countries
Because of illiteracy most producers have no idea
of the quantity and value of their output and do
not keep regular accounts.
Inadequacy, non-availability and unreliability of
statistics.
MEASUREMENT OF NATIONAL
INCOME
1. Output Method or Production Method
Also called the value added method.
Under this method, the economy is divided into
different industrial sectors and the net value added
at factor cost (NVAFC ) by each productive enterprise
as well as by each industry is estimated. Value of
output of an enterprise is found out by multiplying
the physical output with market prices of the goods
produced.
Intermediate consumption
Depreciation
EXAMPLE
OrangeInc Transactions
JuiceInc Transactions
Wages paid to employees
10,000
Oranges purchased from OrangeInc
25,000
Revenue received from sale of orange juice
40,000