GDP - By Sum of Spending, Factor Incomes or Output GDP (Expenditure) GDP (Factor Incomes) GDP (Value of Output) Consumption Government spending Investment spending Change in value of stocks Exports −Imports = GDP (known as aggregate demand) Income from people in jobs and in self employment (e.g. wages and salaries) Profits of private sector business Rent income from the ownership of land Value added from each of the main economic sectors These sectors are Primary sector Secondary sector Tertiary sector - - National Income Similarly, the gross values of the output of animal husbandry, forestry, fishery, mining and factory establishments are obtained by multiplying their estimates of total production with market prices. Net value of the output in these sectors is derived by making deductions for cost of materials used in the process of production and depreciation allowances, etc. from gross value of output.
Net value of each sector measured in this way indicates the net contribution of the sector to the national income. Precautions The product method is followed in the underdeveloped countries, but it is less reliable because the margin of error in this method is large. In India, this method is applied to agriculture, mining and manufacturing, including handicrafts. .
Double counting is to be avoided under value added method. Any commodity which is either raw material or intermediate good for the final production should not be included. For example, value of cotton enters value of yarn as cost, and value of yarn in cloth and that of cloth in garments. At every stage value added only should be calculated.
. The value of output used for self consumption should be counted while measuring national income. . In the case of durable goods, sale and purchase of second hand goods (for example pre owned cars) should not be included.
. . . Income Method (Factor Earning Method) This method approaches national income from the distribution side.
Under this method, national income is