In all the three methods of calculating National Income (Expenditure Method, Income Method an Value Added Method) the National Income remains the same. The reasons behind is.

Circular flow of Income

The correct answer is option (4) : Circular flow of Income

Explanation :

In a closed economy, the three methods of calculating National Income (Expenditure Method, Income Method, and Value Added Method) are essentially different ways of looking at the same economic activity. The circular flow of income concept captures this interdependence.

In the circular flow of income, households provide factors of production (land, labor, capital) to firms, and in return, firms pay wages, rent, and profits to households. These payments constitute the income of households. On the other side, households spend this income on goods and services produced by firms, leading to expenditures.

The equality of income and expenditure is maintained because every payment from one sector becomes income for another, creating a continuous circular flow. Therefore, the National Income calculated by each method is the same, reinforcing the idea of a circular flow of income in the economy.