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    Economics PPT Mid Term

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    Tanishka
    This document provides information about calculating national income using the income method. It defines national income as the total factor incomes earned by residents of a country within a year. The income method measures national income in terms of wages, rent, interest, and profits received by owners of labor, land, capital, and enterprise. It outlines the steps to calculate national income which include estimating compensation of employees, operating surplus, mixed income of self-employed, and summing these components to get national income or net domestic product at factor cost.

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    Economics PPT Mid Term

    Uploaded by

    Tanishka
    17 views9 pages
    This document provides information about calculating national income using the income method. It defines national income as the total factor incomes earned by residents of a country within a year. The income method measures national income in terms of wages, rent, interest, and profits received by owners of labor, land, capital, and enterprise. It outlines the steps to calculate national income which include estimating compensation of employees, operating surplus, mixed income of self-employed, and summing these components to get national income or net domestic product at factor cost.

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    Economics Ppt Mid Term

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    This document provides information about calculating national income using the income method. It defines national income as the total factor incomes earned by residents of a country within a year. The income method measures national income in terms of wages, rent, interest, and profits received by owners of labor, land, capital, and enterprise. It outlines the steps to calculate national income which include estimating compensation of employees, operating surplus, mixed income of self-employed, and summing these components to get national income or net domestic product at factor cost.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    17 views9 pages

    Economics PPT Mid Term

    Uploaded by

    Tanishka
    This document provides information about calculating national income using the income method. It defines national income as the total factor incomes earned by residents of a country within a year. The income method measures national income in terms of wages, rent, interest, and profits received by owners of labor, land, capital, and enterprise. It outlines the steps to calculate national income which include estimating compensation of employees, operating surplus, mixed income of self-employed, and summing these components to get national income or net domestic product at factor cost.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 9

    Name: Tanishka Shrivastava

    Class: XII Sec: Humanities


    Subject: Economics
    Topic: Income Method Measure To
    Calculate National Income
    INCOME METHOD
    MEASURE TO CALCULATE
    NATIONAL INCOME
    NATIONAL INCOME
    It is defined as the sum total of all the factor
    incomes earned by normal residents of a country,
    within the domestic territory of a country and
    from the rest of the world, during a period of an
    accounting year
    INCOME METHOD
    In this method, national income is
    measured in terms of factor payments
    (wages, rent, and profit) to the owners
    of the factors of production (labour,
    land, capital, and enterprise), during
    an accounting year. This method is
    also known as the Share Method or
    Factor Payment Method
    Steps to calculate National Income using Income Method
    1. Estimation of Compensation of Employees
    It includes
    *Wages and salaries in cash
    *Payments in kind such as rent-free house
    *Employer’s contribution to social security schemes such as provident fund
    *Pension on retirement, as it is the part of service contract between employer and employees
    Symbiotically
    Compensation of employees = Wages and salaries in cash + payments in Kind + Employer’s
    Contribution to Social Security Schemes + Pension on Retirement

    2. Estimation of Operating surplus


    It refers to income from property and entrepreneurship. I include the following items
    *Rent and Royalty
    *Interest
    * Profit
    Symbiotically,
    Operating Surplus = Rent and Royality + Interest +Profit
    Where,
    Profit = Dividend / Distributed Profits + Corporate Dividend Tax + Undistributed Profit
    3. Estimation of mixed Income of Self-Employed
    The income of the self-employed persons using their own
    land, labour, capital, and entrepreneurship for production is
    termed as mixed-income

    4. Estimation of National Income (NNP at fc)


    It is computed using the following formulae

    NDP at fc = Compensation of Employees + Rent and


    Royalty + Interest + profit + Mixed Income of Self-employed
    PRECAUTIONS OF INCOME METHOD
    While using the income method, items included and excluded in the calculation
    of national income are:-
    * Income From Illegal activities like smuggling, theft, gambling, etc. should not
    be included.
    * Commission paid on the sale and purchase of second-hand goods are to be
    included.
    * Income in terms of windfall gains should not be included
    * Imputed rent of the owner-occupied houses is treated along with rent as a
    component of factor incomes.
    * Income tax is paid out of compensation of employees. It should not be
    separately added to the estimation of national income.
    * Brokerage on the sale/purchase of shares and bonds is to be included.
    * Transfer earnings like old age pensions, unemployment allowance, scholarship
    pocket expenses, etc. should not be included
    Calculate the NDP at FC by using the income method.

    EXAMPLE S. No. Items Amount


    (in crores)

    Solution: (i) Wages and Salaries 32,100

    NDP at FC = Compensation of
    employees +
    (ii) Rent 52,300

    Operating surplus + (iii) Royalty 12,500

    Mixed income + (iv) Interest 10,100

    Income from domestic products (v) Corporate tax 50,590

    accruing to the public sector (vi) Dividend 20,410

    = Rs. 32,100 crores + Rs. 2,26,900


    (vii) Undistributed profit 81,000

    crores + Rs. 12,110 crores + (viii) Mixed income of self-employed 12,110

    Rs. 20,690 crores (ix) Savings of non-departmental


    enterprise
    5,190

    Ans = Rs. 2,91,800 crores (x) Income from property and


    entrepreneurship to government
    15,500

    administrative departments

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