Question

a.) To measure the wealth of every country, economists have devised several tools and methods involving complex calculations. One of these methods involves calculating the aggregate income of a particular country. What is the meaning of aggregate income and what is the formula for calculating aggregate income ​

Answer 1

Aggregate income is total amount of income generated by all the individual, businessman and government in a given period of time. This is the most important tool used to measure the total wealth of a country. The aggregate income did not consider the inflation, debt and taxes, because these are leakages of the economy. These factors will not measure the wealth of a nation. This measure how much money individuals and businessman make. The aggregate income includes the net profit of the businessman.
The calculation of aggregate income includes the sources of all income. The aggregate income include the variables like, Employee income (E), Business income of the owner (B), Rental income (R), Cooperate income (C), interest rate income (I), government income (G), government introduced subsidies (S). The last two variables were subtracted.
Aggregate income = E+ B+ R+ C+ I+ (G –S).
Each of the economic agents gets advantage through calculating the aggregate income. The businessman can calculate various expenses incurred in the production. This played an important role in the GDP calculation. The most important function of the aggregate income is the accurate understand of the income which generated in the economy over a specific period of time.