Explain how National income is calculated

National income is calculated in the following ways;

• The income approach: the national income is measured by adding up the pre-tax income generated by the individuals and companies in the economy. It consists of income from wages, rent of buildings and land, interest on capital, profits, etc. in an accounting year. When this approach is used, transfer payments are excluded to avoid double counting

• The expenditure approach: the national income is measured by adding up the expenditures made by individuals, companies, and the government. Thus, it combines consumer spending, investments made by companies, net exports, and government spending to calculate the national income. Such expenditures exclude consumptions, investment, government expenditures and net exports.
• The product (output) approach: the aggregate value of final goods and services produced in a country during a financial year is computed at market prices. The data of all the productive activities-agricultural products, Minerals, Industrial products, the contributions to production made by transport, insurance, communication, lawyers, doctors, teachers. Etc. are accumulated and assessed.
• Value Added Method: The distinction between the value of material outputs and material inputs at every stage of production is Value added.