Page 223 - DECO405_MANAGERIAL_ECONOMICS

Managerial Economics Pavitar Parkash Singh, Lovely Professional University

Notes Unit 14: Calculation of National Income

CONTENTS
Objectives

Introduction
14.1 Product Approach

14.2 Income Approach
14.3 Expenditure Approach

14.4 Problems in Measuring National Income
14.5 Circular Flow of Income

14.5.1 Circular Flow of Income in a 2 Sector Model
14.5.2 Circular Flow of Income in a 3 Sector Model

14.5.3 Circular Flow of Income in a 4 Sector Model
14.6 Summary

14.7 Keywords
14.8 Self Assessment

14.9 Review Questions
14.10 Further Readings

Objectives

After studying this unit, you will be able to:
Discuss the methods of measuring national income
Identify problems in measuring national income
Describe the circular flow of income in 2 sector and 4 sector model

Introduction

We can measure national income either at the production stage by measuring the value of
output or at the income accrual stage by measuring the amount of factor income earned or at the
expenditure stage by measuring the size of total expenditure incurred in the economy. The
Following are the three different methods of measuring national income.
1. Product Approach
2. Income Approach

3. Expenditure Approach

218 LOVELY PROFESSIONAL UNIVERSITY