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The factor cost method of estimating national income includes which of the following?
- a)Rent, wages, interest and profits
- b)Investment and savings
- c)Price
- d)None of the above
Correct answer is option 'A'. Can you explain this answer?
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The factor cost method of estimating national income includes which of...
The factor cost method takes into account the cost incurred to employ factors of production in the economy. The factors of production, namely, land is paid rent, labour is paid wages, capital is paid interest and entrepreneur is paid profits. These costs are taken into account to measure national income using the factor cost method.
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The factor cost method of estimating national income includes which of...
Factor Cost Method of Estimating National Income
The factor cost method of estimating national income involves considering the various factors of production that contribute to the generation of income in an economy. These factors include rent, wages, interest, and profits.
Components of Factor Cost Method
The factor cost method breaks down national income into the following components:
- Rent: This refers to the income earned by owners of land and other natural resources for their use in the production process.
- Wages: This represents the income earned by laborers for their participation in the production of goods and services.
- Interest: This is the income earned by owners of capital for providing financial resources for production.
- Profits: This refers to the income earned by entrepreneurs for organizing the factors of production and taking risks in the production process.
Importance of Factor Cost Method
The factor cost method is crucial for estimating national income accurately as it provides a comprehensive view of the income generated by different factors of production in the economy. By considering rent, wages, interest, and profits, this method captures the total value of goods and services produced within a country's borders without taking into account any indirect taxes or subsidies.
In conclusion, the factor cost method of estimating national income is essential as it helps in understanding the distribution of income among different factors of production and provides valuable insights into the overall economic performance of a country.
The factor cost method of estimating national income involves considering the various factors of production that contribute to the generation of income in an economy. These factors include rent, wages, interest, and profits.
Components of Factor Cost Method
The factor cost method breaks down national income into the following components:
- Rent: This refers to the income earned by owners of land and other natural resources for their use in the production process.
- Wages: This represents the income earned by laborers for their participation in the production of goods and services.
- Interest: This is the income earned by owners of capital for providing financial resources for production.
- Profits: This refers to the income earned by entrepreneurs for organizing the factors of production and taking risks in the production process.
Importance of Factor Cost Method
The factor cost method is crucial for estimating national income accurately as it provides a comprehensive view of the income generated by different factors of production in the economy. By considering rent, wages, interest, and profits, this method captures the total value of goods and services produced within a country's borders without taking into account any indirect taxes or subsidies.
In conclusion, the factor cost method of estimating national income is essential as it helps in understanding the distribution of income among different factors of production and provides valuable insights into the overall economic performance of a country.
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The factor cost method of estimating national income includes which of the following?a)Rent, wages, interest and profitsb)Investment and savingsc)Priced)None of the aboveCorrect answer is option 'A'. Can you explain this answer?
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