Question

State the steps pertaining to the estimation of National Income by Value Added Method.

Describe the steps involved in the estimation of national income by value-added method.

Give an outline of the steps involved in the estimation of national product by value added method.

Answer 1

1. Classification of Production Units: Divide all of the economy’s production units into primary, secondary, and tertiary sectors.
2. Estimation of Net Value Added by Enterprise: Gross Value Added at Market Price (GVA_MP) of each sector, compute the (GDP_MP). GDP_MP is the sum of each sector’s GVA_MP,
   i.e, ∑GVA_MP = GDP_MP.
3. Estimating Net Domestic Output: Net Domestic Output is the total value of all final goods and services produced within a country during a year after deducting depreciation. Formula using the value-added method:
   NDP at FC = Gross Value of Output − Intermediate Consumption − Depreciation
4. Estimating of Net Factor Income from Abroad: To get the national income, compute the Net Factor Income from Abroad (NFIA) and add it to the domestic income.
   National Income or NNP_FC = NDP_FC + NFIA