Distinguish between 'output method and income method of measuring national income'.
Output method:
a) The Output Method is the most direct method of arriving at an estimate of a
country’s national output or income.
b) It involves adding the
output figures of all firms in the economy to get the total value of the
nation’s output.
c) The outputs can be grouped
into certain sectors such as the primary sector, secondary sector and the
tertiary sector.
d) This method also has two
sub-methods: The Final Goods Method and the Value Added Method.
Income Method -
a)
The
Income Method measures national income from the side of payments made to the
primary factors of production in the form of rent, wages, interest and profit
for their productive services in an accounting year.
b)
Thus,
national income is calculated by adding up factor incomes generated by all the
producing units located within the domestic economy during a period of account.
c)
In
income method national income is measured at the stage when factor incomes are
paid out by enterprises to owners of factors of production—land, labour,
capital and enterprise.
d)
Since
net value added by an enterprise is the result of services of factors of
production, therefore, the same is distributed in the form of money income
(rent, wages, interest, etc.) among factors of production.
Output method:
a) The Output Method is the most direct method of arriving at an estimate of a
country’s national output or income.
b) It involves adding the output figures of all firms in the economy to get the total value of the nation’s output.
c) The outputs can be grouped into certain sectors such as the primary sector, secondary sector and the tertiary sector.
d) This method also has two
sub-methods: The Final Goods Method and the Value Added Method.
Income Method -
a) The Income Method measures national income from the side of payments made to the primary factors of production in the form of rent, wages, interest and profit for their productive services in an accounting year.
b) Thus, national income is calculated by adding up factor incomes generated by all the producing units located within the domestic economy during a period of account.
c) In income method national income is measured at the stage when factor incomes are paid out by enterprises to owners of factors of production—land, labour, capital and enterprise.
d) Since net value added by an enterprise is the result of services of factors of production, therefore, the same is distributed in the form of money income (rent, wages, interest, etc.) among factors of production.
