Calculation of National Income

National Income is the total value of goods and services produced by an economy in a given period of time, usually a year. It is an important measure of the economic performance of a country. To calculate National Income, we can use the following methods:

1. Production Method
This method calculates National Income as the sum of all the value-added by different sectors of the economy. It involves the following steps:
- Identify all the sectors of the economy, such as agriculture, manufacturing, services, etc.
- Determine the value of output produced by each sector, either by measuring the quantity of goods produced or by using the market prices of those goods.
- Subtract the value of intermediate goods and services used in the production process from the total value of output to get the value-added by each sector.
- Add up the value-added of all the sectors to get the Gross Value Added (GVA) of the economy.
- Deduct the depreciation of capital assets from the GVA to get the Net Value Added (NVA) of the economy.
- Add up the NVA of all the sectors to get the National Income.

2. Income Method
This method calculates National Income as the sum of all the factor incomes earned in the economy. It involves the following steps:
- Identify all the factors of production, such as labor, capital, land, and entrepreneurship.
- Determine the total income earned by each factor, such as wages, rent, interest, and profits.
- Add up all the factor incomes to get the Gross Domestic Income (GDI) of the economy.
- Deduct the indirect taxes and subsidies from the GDI to get the Net Domestic Income (NDI) of the economy.
- Add up the NDI and the income earned by residents of the country from abroad to get the Net National Income (NNI) of the economy.

3. Expenditure Method
This method calculates National Income as the sum of all the final expenditures made in the economy. It involves the following steps:
- Identify all the components of final expenditure, such as consumption, investment, government spending, and net exports.
- Determine the total value of each component, either by measuring the quantity of goods and services or by using the market prices of those goods and services.
- Add up all the components of final expenditure to get the Gross Domestic Product (GDP) of the economy.
- Deduct the depreciation of capital assets from the GDP to get the Net Domestic Product (NDP) of the economy.
- Add up the NDP and the income earned by residents of the country from abroad to get the Net National Product (NNP) of the economy.

Which method is used to calculate National Income?
All the three methods mentioned above can be used to calculate National Income. However, the Income Method is considered the most comprehensive and accurate method, as it takes into account all the factor incomes earned in the economy. Net National Product (NNP) is calculated using the Income Method.