National Income and Related Aggregates Test - 16

Three methods of calculating national income:

• Product method: In this method, national income is measured as money value of all final goods and services produced in an economy during a year. 
• Income method: According to this method income is measured as a flow of factors income. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneur gets profit as their remuneration.
• Expenditure method: National income is measured as a flow of expenditure. t includes the sum total of private consumption expenditure, government consumption expenditure, gross capital formation (Government and private) and net exports (export-import).

Inflation means roaming of money that goes from one hand to other as macro economics deals with whole economy the money in this form passes from one hand to another.

The total value of goods and services produced by a country in a financial year is known as the National Income of that country. Intermediate goods are not included in the National Income while measuring National Income to avoid double accounting. Final goods are included in the calculation of national income.

Real GNP refers to GNP at constant prices. It is the market value of the final goods and services produced within the domestic territory of a country during an accounting year, as estimated using the base year prices.

A transfer payment is a apayment against which no services are rendered. Therfore no production takes place. Since no production takes place it has no place in national income.

Charities, donations, gifts, scholarships, etc are some examples.

Flows always pertain to specific period of time in economics. 

After deducting the depreciation charges of plant and machinery from GDP, we get net value of GDP which is called NDP.

Intermediate goods are sold between industries for resale or the production of other goods. These goods are also called semi-finished products because they are used as inputs to become part of the finished product.

Consumption goods refer to those goods which satisfy the wants of the consumer directly. These are not used in the production of other goods. For example, food, shirts, shoes, etc.

An example of durable goods is fan.

Examples of consumer durable goods include vehicles, books, household goods (home appliances, consumer electronics, furniture, tools, etc.), sports equipment, jewelry, medical equipment, and toys.