National income measures: Select one: a. the amount of wage, rent, interest, and profits income actually...

National income measures:

Select one:

a. the amount of wage, rent, interest, and profits income actually received by households.

b. the after-tax income of resource suppliers.

c. the total of all sources of private income plus government revenue from taxes on production and imports.

d. nominal GDP after it has been inflated or deflated for changes in the value of the dollar.

Solutions

Expert Solution

There are three methods of measuring national income:

1) Product Method/ Value added method - It is the method where the value of all goods and services is estimated. The only value of the final good consumption is added. Since the value of ntermediate goods is already included in the value of final goods, so they are not separately accounted. At every stage of production, the addition to the value of final good is calculated and added to get national income.

2) Income method- Income earned by various sources: households supply labour- they receive wages and salaries, households are entrepreneurs also they receive profits, they rent their land to others- they receive rent income on it and finance capital for business so they receive interest. The sum total of all these incomes adds up to national income.

3) Expenditure method- all the expenditure or income spent by households, government consumption expenditure, change in inventory and net exports (exports-imports). These add upto national income.

According to the question, option a is the correct option.

National income measures:

a. the amount of wage, rent, interest, and profits income actually received by households - Income method.

Rahul Sunny answered 2 years ago

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