On the basis of the given data, estimate the value of National Income : State any three precautions to be taken while estimating national income by Value Added method.

Question

Accepted Answer

Calculation of National Income:

National Income (NNP_FC) can be calculated using:
1. Product Method: NDP_FC + NFIA
2. Income Method: Compensation of Employees + Operating Surplus + Mixed Income + NFIA
3. Expenditure Method: C + G + I + (X-M) - Depreciation - NIT + NFIA

Precautions for Value Added Method:
1. Exclude intermediate goods to avoid double counting
2. Include only value added at each stage of production
3. Use market prices for output and factor cost for inputs
4. Exclude non-production transactions
5. Include imputed values for owner-occupied houses