Expenditure method and income method - class-XII

Mixed income refers to the income of self-employed persons, which is difficult to separate into wages, rent, and profit. This is a specific challenge associated with the Income method of calculating national income.

The gross domestic income is the total income earned by the county in one year, it is calculated as the sum of consumption, investment, government spending and net exports. 

Gross National Product (GNP) is defined as the sum of the gross domestic product (GDP) and net factor incomes from abroad. Thus, in order to estimate the gross national product of India, we have to add net factor income from abroad, i.e., income earned by Indian residents abroad minus income earned by non-residents in India to the gross domestic product of India. Symbolically, GNP = GDP + NFIA; where NFIA is the net factor income from abroad.

The distribution of national income among the factors of production (land, labor, capital, and entrepreneurship) is known as the study of distribution in economics.

Income from the sale of second-hand goods is excluded from National Income because the value of the good was already counted in the year it was produced as a new good.

National Income at factor cost is calculated by taking the net domestic product at market price, subtracting indirect taxes, and adding subsidies.

Old age pension is paid to people after retirement who no longer provide any productive services in exchange. The government in this case collects taxes from working population and provide pension to older population in the form of government expenditure.

Illegal income is not recorded or reported to the government or authorities since it has not been generated through legal economic activities. Thus, it is not accounted for when national income is calculated.

Due to the large size of the informal sector and difficulties in data collection, national income estimates in India are often considered to have significant margins of error, hence not fully accurate.

Illegal income (like betting) is generally excluded from national income calculations, while transfer payments (like scholarships) are also excluded as they do not represent production of goods or services.

National Income is defined as the total money value of all final goods and services produced within a country during a given period.

The Income Method is often considered most suitable for developed economies where income tax records and organized financial data are comprehensive and reliable.

This specific definition of national income, emphasizing the reduction of goods and services to a common monetary basis, is attributed to the economist J.R. Hicks.

To avoid double counting, only the value of final goods and services is included in the GDP calculation, as the value of intermediate goods is already embedded in the final price.