Question

State the steps pertaining to the estimation of National Income under the income method.

Answer 1

Steps pertaining to the estimation of National Income under the Income method:

1. Identify and classify production units into distinct heads namely primary, secondary, and tertiary sector.
2. Estimate and classify the factor payments in different categories as Compensation of Employees, Operating Surplus, and Mixed Income. The sum of factor payments represents the contribution of the sectors to Domestic Income (NDP_FC)
3. Finally, estimate and add the value of Net Factor Income from Abroad (NFIA) to arrive at National Income (NNP_FC).