DMPQ: Explain in detail the methods to calculate National Income.

There are 3 methods to calculate the National income.These methods are given by Simon Kuznets.

  • PM (Product Method) or Product service method.
  • IM (Income Method)
  • CM (Consumption Method) or expenditure method.

In India the combination of Product method and Income methods is used for calculating the National Income.

 

PRODUCT METHOD:

NI = GDP  – income earned in foreign countries Depreciation.

In the Product method the GDP is taken into consideration.Net income earned in foreign countries is deducted from the GDP.From this the depreciation is subtracted.

 

INCOME METHOD:

In this method the National Income is calculated by

National Income = Total Rent Plus (+) Total wages Plus (+) Total Interest Plus (+) Total Profit.

The total net income of the people working in different sectors and commercial sectors are taken into consideration.

 

Consumption Method:

This method is not generally used for calculating the National income.According to this method

  • National Income =Total Consumption Plus Total Savings

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