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Methods of calculating National Income
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This lesson discusses the different methods of calculating national income with the help of circular flow

Arpita Prakash
YouTuber NCERTs series initiator at Unacademy 'Educator of the Month' for Feb'19 CBSE 0.1% Merit Certificate holder in Mathematics

Unacademy user
thanku so much mam your voice us very sweet
ma'am please indicate chapter no. and their parts in title
mam many days it(complete book) take?
  1. Spending Goods and Services Firms Households Factor Payments Factor Services Fig. 2.1: Circular Flow of Income in a Simple Economy

  2. Income spent on the goods and services produced by firms is the aggregate expenditure received by firms Value of expenditure Value of goods and services Aggregate income aggregate value of goods and services produced by firms When the aggregate received by the firms is paid out to factors of production, it takes form of aggregate income Point A- Expenditure Method- measure of aggregate value of spending that firms receive for final goods and services which they produce Point B- Product Method- measure of aggregate value of final goods and services produced by all firms . Point C- Income Method- measuring sum total of all factor payments . Equal flows at Point A and C . Also rise in the flow at one point must eventually lead to a rise in the flow at all levels o Even if an economy decides to spend more than the present level of income, it's income will eventually rise to a level consistent with higher spending level Macroeconomic model- describes the functioning of an imaginary economy doesn't describe an actual economy in detail o Assumptions- no household savings, no government, no trade with countries Even in any complicated economic system, annual production of goods and services estimated through each of three methods is same