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Lavanya
Logesh
Mahendran
Manivel
National income analysis
The national income analyses are an accounting
framework used in measuring current economic
activity.
The national income analyses are based on the idea
that the amount of economic activity that occur during
a period of time can be measured in terms of:
1.The amount of output produced, excluding output
used up in intermediate stages of production (product
approach);
2. The income received by the producer of output
(income approach);
3.The amount of spending by the ultimate purchase of
output (expenditure approach);
EXAMPLE
ORANGE LTD TRANSACTION
JUICE LTD
Juice ltd buys Rs 25000 of orange from orange ltd and pays
wages Rs 10000 to worker to process the orange juice. It sells the
orange for Rs 40000, so its profit before taxes is Rs 5000 (Rs
40000-25000-10000 ). After paying taxes of Rs 2000 ,its after
tax profit is Rs 3000.
Product approach
• Market value of final finished goods and services
• Excludes intermediate goods used in intermediate
stages of production
• Value added is the value of output minus value of its
input
EXAMPLE:
Revenue of Orange Inc = 35,000
Value added by JuiceInc = output-input
= 40,000-25,000=15,000
GDP = 35,000+15,000 = 50,000
Expenditure approach
• Total spending on final goods
• GDP= consumption+investment+govt. purchases+
net exports
• Consumption is spending by domestic household on
final goods
• Net exports means export minus import
EXAMPLE
consumption from OrangeInc=10,000
consumption from JuiceInc =40,000
GDP = 10,000+40,000 = 50,000
INCOME APPROACH
It includes
Compensation of employees
Proprietor’s income
Rental income
Corporate tax
EXAMPLE: OrangeInc JuiceInc