Product Approach of NI Accounting

According to this method, national income is measured in the form of total product obtained from each economic sector such as primary, secondary and tertiary sectors. The product approach consists the following:

Primary Sector

It includes agriculture based productions like fishery, forestry, and other production activities.

Secondary Sector

It includes manufacturing, electricity, water supply and such other public welfare activities.

Tertiary Sector

It includes banking, insurance, transport and communication, defense, administration and such other institutions. Thus,

GDI=Total Production of (Primary+Secondary+Tertiary)sector

In order to solve this problem, we can either of use the following two methods:

Final Product Method

GNP is the money value of final goods and services produced during a year. So, national income is measured by finding the market value of all final goods and services produced in the economy during a year.

Value Added Method

In this approach, the value added at different stages of production is calculated and then for estimating national income. According to this approach, national income is the sum total of value added by different producing units of a country in their production process. Thus,

Value Added=Value of Output-Cost of the Goods


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