Read the passage carefully and answer the questions based on the passage:

Macroeconomics: Economy as a whole

The founding father of modern economics, had suggested that if the buyers and sellers in each market take their decisions following only their own self-interest, economists will not need to think of the wealth and welfare of the country as a whole separately. For various purposes macroeconomists had to study the effects in the markets of taxation and other budgetary policies, and policies for bringing about changes in money supply, the rate of interest, wages, employment, and output. Macroeconomics has, therefore, deep roots in microeconomics because it has to study the aggregate effects of the forces of demand and supply in the markets.

In a simplified economy, the households may dispose off their earnings by spending their entire income on the goods and services produced by the domestic firms as other channels if disposing their income are closed. The factors of production use their remunerations to buy the goods and services which they assisted in producing. The aggregate consumption by the households of the economy is equal to the aggregate expenditure on goods and services produced by the firms in the economy.

In which of the following method the flow is measured as the sum total of all factor payments?

Income Method.

The correct answer is Option (3) → Income Method. 

In national income accounting, the Income Method measures the flow of goods and services as the sum total of all factor payments earned by the factors of production in an economy.

These factor payments include:

• Wages and salaries → for labour

• Rent → for land

• Interest → for capital

• Profit → for entrepreneurship