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2) What is national income and why is it calculated? Explain the three main methods of computing national income?(250 words)

Topic– Part of static series under the heading – “National income – methods”

2) What is national income and why is it calculated? Explain the three main methods of computing national income?(250 words)

Key demand of the question

The question is quite self explanatory its demand. First we need to explain what NI is, how computing NI is useful for economies and finally it expects us to bring out how the three main methods of computing NI.

Structure of the answer

Introduction – Explain that National Income is the total value of all final goods and services produced by the country in certain year. The growth of National Income helps to know the progress of the country.

Body

  • Explain the various advantages of calculating national income – in policy formulation, effective decision making and for making international economic comparisons etc
  • Discuss and explain the three main methods of computing national income – income method, expenditure method and output method. Also explain how the national income of India is calculated