Question

Distinguish between:

Output method of measuring national income and Income method of measuring national income.

Answer 1

Basis of comparison	Output method	Income method
1. Definition	This method measures the national income by estimating the contribution made by each of the producing units in the economy to the total production within the domestic territory during an accounting year.	This method measures the national income by aggregating all the factor incomes (in the form of wages, rent, interest and profits) paid to the owners of the factors of production (land, labour, capital and enterprise) within the domestic territory in an accounting year.
2. Result	It gives the gross domestic product at market price (GDPMP).	It gives the net domestic product at factor cost (NDPFC).
3. Accuracy	It is the least accurate.	It is the most accurate.
4. Users	This method is used by underdeveloped and developing countries.	This method is used by developed countries.