Methods of Calculating National Income Class 12 Notes

Methods of Calculating National Income Class 12 Notes
Methods of Calculating National Income Class 12 Notes

Download NCERT Class 12 Macroeconomics Chapter 3 Methods of Calculating National Income Class 12 Notes CBSE Class 12 Macroeconomics chapter 3 Methods of Calculating National Income Class 12 Notes are made by research of last ten years NCERT question paper.

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Methods of Calculating National Income Class 12 Notes PDF

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Methods of Calculating National Income Notes

Methods of Measuring National Income

There are three methods of estimation of National Income:

  1. Value Added Method
  2. Income Counting Method
  3. Expenditure Method

Value Added Method

In this method, the value of final goods and services produced by all units of production in the country is aggregated. In this method production of final goods and services is being measured by the Net Value Addition in the Production Process.

Net Value Addition = Gross Value Addition – the Cost of Raw Materials. For example- if A thread manufacturing unit produced a thread of Rs. 3000 during a year and used Cotton of Rs. 1000 as the raw material for this the net value added by the thread unit is Rs. 2000.

Value-added of a firm = Value of output produced by the firm — Cost of intermediate goods used

Steps for calculation of national income by Value-added method

Estimation of the value of output produced by each firm in all the sectors of the economy during the year:

Value of output is the market value of goods and services produced by a firm during an accounting year.

Value of output = Output produced (in units) x Market price

If a firm had no initial unsold stock in the beginning of the year:

Value of output produced = Sales + Value of unsold stock

Note: Sales = Output sold (in units) x Market price Sales = Sale of goods and services to domestic buyers + Exports of goods and services.

If a firm had some unsold stock in the beginning of the year:

Value of output = Sales + Net change in stock

Income Counting Method

In this method, the income from productive activities of all citizens is aggregated in a year. In other words in this method, the income of factors of production is aggregated in a year. Factors of production get incomes as the following form:

  • Wage Income
  • Rent Income
  • Interest Income
  • Profit Income

Expenditure Method

In this method, the expenditure made by al citizens in a year is aggregated. It is assumed that a person either expend or save their income. In this way, the national Income must be equal to the total expenditure savings in the economy.


What are the 3 methods of calculating national income?

Following are methods of measuring national income: Census of Product, Method Census of Income Method, Census of Expenditure Method, Value Added Method.

How many methods are there to calculate national income?

There are three methods of calculating national income which are Product Method, Income Method, Expenditure Method Value Added Method.

What are the methods of calculating?

In economics, economists use three methods of calculating national income which is product method, expenditure method, value-added method, income method.

Which method is best for calculating national income?

Product Method: This is the best simple method to calculate the national income.

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