The total sum of income received by these individuals comprise the national income for a given period of time.Besides these, there are professionals who employ their own labor and capital like advocates, doctors, barbers, CAs, etc. Thus, we can classify these perspectives into the following methods of measurement of National Income.Under this method, we add the values of output produced or services rendered by the different sectors of the In this method, we include only the value added by each firm in the Hence, we use the value-added method. Thus, in order to avoid distortions caused by stock appreciation in an inflationary period, a correction has to be made to eliminate changes in the value of stocks due to price changes alone.
Moreover, work done in the ‘Black or Underground Economy’, for which there is no official record, is not included in calculations. It is also to be noted that some of the income derived from economic activity within the country will be paid to foreign owners of assets located in India, while income from Indian-owned assets abroad will be moving in the opposite direction. Provided double counting is avoided, it is possible to derive national income estimates partly by one and partly by other methods according to the availability of data.Furthermore, the application of these different methods would provide analytical data on the functional relationship between the various groups and sectors of the economy, and the related subtotals render great help in formulating measures of economic policy. For example, many teachers teach their own children, farmers produce food for themselves and many people drive their own cars, and many people even make their own clothes. Definition of National Income: National income of a country means the sum total of incomes earned by the citizens of that country during a given period, say a year. Do we express statistics in terms of market prices or constant prices? As Lipsey has put it, changes in stocks only contribute to changes in GDP when their physical quantities change. As a broad rule, all purchases charged to current expense by business are treated as intermediate goods added to stock within the accounting period represent an addition to capital and though.
A certain portion of company profit is added to reserves (and not distributed as dividends among shareholders). All these measures of national income are supposed to give the same final figure. We calculate money value of all final goods and services produced in an economy during a year. This depreciation is to be treated as part of the gross return on capital. Although national income accounting is not an exact science, it provides useful insight into how well an economy is functioning, and where monies are being generated and spent.
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national income approaches