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09 March 2018

Describe the different methods of measuring national income




There are three methods of measuring national income. This are-
(i) Production or output method
(ii) Income method
(iii) Expenditure method

(i) Production or output method: This method approaches national income from the outside. According to this method, the economy is divided into different sectors such as agriculture, mining, manufacturing, small enterprises, commerce, transport, communication and other services. Then the gross product is found out by adding up net values of all the production that has taken place in these sectors during a given year.
This method of estimating (আনুমানিক হিসাব) national income enables us to trace the origin of the national income aggregate (সমষ্টি) to the different sectors of the economy. Therefore this is called national income by industrial origin.

(ii) Income method: This method approaches national income from the distribution side. In other words this method measures the national income after it has been distributed and appears as income earned or received by individuals of the country. Thus according to this method national income is obtained by summing up of the incomes of all individuals in the country.
This method estimating national income has the great advantage of indicating the distribution of national income among different income groups such as landlords. Capitalists, workers etc. Therefore this is called national income by distributive share.

(iii) Expenditure method: This method arrives at national income by adding up all the expenditure made on goods and services during a year. Income can be spent either on consumer goods or investment goods. Thus we can get national income by summing up all consumption expenditure and investment expenditure made by all individuals as well as the government of a country during a year.

Hence, the gross national product is found by, adding up-
(a) Personal consumption expenditure
(b) Gross domestic private investment
(c) Net foreign investment
(d) Government expenditure


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