Arrange the following steps in the calculation of national income, by income method in correct sequence:
(A) Add Net Factor from Abroad to arrive at National Income.
(B) Estimate the factor income estimated by each sector.
(C) Identify and classify the income-generating units.
(D) Calculate domestic factor income.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (C), (B), (D), (A)
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(C) Identify and classify the income-generating units. First, the economic units engaged in production are identified and classified by sector.
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(B) Estimate the factor income earned by each sector. Next, the factor incomes (wages, rent, interest, profit) earned in each sector are estimated.
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(D) Calculate domestic factor income. The total factor incomes from all sectors are added to get Domestic Income or Net Domestic Product at Factor Cost.
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(A) Add Net Factor Income from Abroad (NFIA) to arrive at National Income. Finally, NFIA is added to domestic income to get National Income or Net National Product at Factor Cost.