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  • National Income Final

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    mahishah2402
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    The document outlines the key differences between calculating GDP using the income method versus the expenditure method. When using the income method, depreciation and net indirect taxes are not deducted, whereas when using the expenditure method depreciation is deducted and net indirect taxes are always deducted. Both methods include compensation of employees, rent interest and profits, as well as net factor income from abroad and net indirect taxes in their calculations.

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    The document outlines the key differences between calculating GDP using the income method versus the expenditure method. When using the income method, depreciation and net indirect taxes are not deducted, whereas when using the expenditure method depreciation is deducted and net indirect taxes are always deducted. Both methods include compensation of employees, rent interest and profits, as well as net factor income from abroad and net indirect taxes in their calculations.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    10 views1 page

    National Income Final

    Uploaded by

    mahishah2402
    The document outlines the key differences between calculating GDP using the income method versus the expenditure method. When using the income method, depreciation and net indirect taxes are not deducted, whereas when using the expenditure method depreciation is deducted and net indirect taxes are always deducted. Both methods include compensation of employees, rent interest and profits, as well as net factor income from abroad and net indirect taxes in their calculations.

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    INCOME METHOD:

    1. DEPRECIATION - NOT TO BE TAKEN


    2. NET INDIRECT TAXES (NIT) - NOT TO BE TAKEN
    (EVEN IF GIVEN IN THE QUESTION)

    EXPENDITURE METHOD:

    1. DEPRECIATION:
     IF GROSS DOMESTIC CAPITAL FORMATION IS GIVEN:
    GROSS DOMESTIC CAPITAL FORMATION - DEPRECIATION
     IF NET DOMESTIC CAPITAL FORMATION IS GIVEN:
    NET DOMESTIC CAPITAL FORMATION + CHANGE IN STOCK
    2. NET INDIRECT TAXES (NIT) - ALWAYS TO BE DEDECTED

     THINGS INCLUDED IN INCOME METHOD:


    1. Compensation of employees
    2. Rent interest profit (OPERATING SURPLUS)
    3. Corporate tax
    4. Undistributed profits
    5. Dividend
    6. NFIFA(+)
    7. NFITA(-)

     THINGS INCLUDED IN EXPENDITURE METHOD:


    1. Private final consumption expenditure
    2. Government final consumption expenditure
    3. Net exports (+)
    4. Net imports (-)
    5. NFIFA(+)
    6. NFITA(-)

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