This document discusses different methods for measuring national income and output, including gross domestic product, gross national product, net domestic product, and net national product. It covers economic and non-economic production, intermediate and final products, and how value added is measured using the income, expenditure, and value added methods. Challenges in measuring national income are also outlined, such as accounting for non-monetary transactions and the informal sector in developing countries. Limitations of national income as a metric are noted as well.

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2.  01B. Ahuja Chapter 2
 02. Dwivedi Chapter 4
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3.  Economic Production
◦ Refers to goods and services which are produced for sale and
have market value
◦ Includes marketable and non-marketable production
 Non-Economic Production
◦ Refers to goods and services that are not meant to be sold nor
is there any market for them nor do they have a market price
◦ These add to welfare of individuals
 Services rendered to self, family members, neighbors
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4.  Intermediate Product
◦ Goods that are used as inputs for further production process
 Final Product
◦ Classified as
 Final consumption goods are goods that flow to the ultimate
consumer
 Final capital goods are goods that finally used by firms in the
production process – Investment Goods
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6.  Different measures of output
◦ Gross Domestic Product
◦ Gross National Product
◦ Net Domestic Product
◦ Net National Product
 Output is measured at Factor Cost and Market Price
 Some Identities
◦ Net = Gross – Depreciation
◦ Market Price = Factor Cost + Net Indirect Taxes
◦ Domestic = National – Net Factor Income from Abroad
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10.  Value Added Method
 Income Method
 Expenditure Methods
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11.  In this method, contribution of each enterprise to generation of
flow of goods and services is measured
 Economy is divided into various sectors (agriculture, fishing,
mining, etc.)
 GVAMP = Value of output – Intermediate Consumption
 NVAMP = GVAMP + Depreciation
 NVAFC = NVAMP – Net Indirect Taxes
 NDPFC is obtained by summing NVAFC over all enterprises
 NNPFC = NDPFC + NFIA
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14.  Difficulties in measuring National Income
◦ Treatment of non-monetary transactions
◦ Treatment of government activities
◦ Treatment of income generated by foreign firms
 Difficulties of measuring National Income in
Developing Countries
◦ Prevalence of non-monetized
◦ Illiteracy
◦ Lack of differentiation in economic functions
◦ Unorganized sector
◦ Lack of adequate statistical data
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15.  Limitations
◦ The exclusion of non-market transactions
◦ The failure to account for or represent the degree of income
inequality in society
◦ The failure to indicate whether the nation’s rate of growth is
sustainable or not
◦ The failure to account for the costs imposed on human health and the
environment of negative externalities arising from the production or
consumption of the nation’s output
◦ Treating the replacement of depreciated capital the same as the
creation of new capital
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