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2. National Income Accounting

The chapter introduces fundamental concepts related to national income accounting and the functioning of a simple economy. It explores the circular flow of income, methods for calculating national income—including the product, expenditure, and income methods—and examines the significance of capital goods and the relationships between different types of income. The chapter also discusses limitations of GDP as an indicator of welfare.

Sections

  • 2

    National Income Accounting

    This section introduces national income accounting and its importance in understanding economic activities.

    Learning Practice

  • 2.1

    Some Basic Concepts Of Macroeconomics

    This section explores the fundamental concepts of macroeconomics, focusing on the flow of production, the distinction between final goods and intermediate goods, and the importance of capital in economic growth.

    Learning Practice

  • 2.2

    Circular Flow Of Income And Methods Of Calculating National Income

    This section explores the circular flow of income in a simple economy and delineates three methods of calculating national income: the product method, expenditure method, and income method.

    Learning Practice

  • 2.2.1

    The Product Or Value Added Method

    The value added method calculates the aggregate annual value of produced goods and services by determining the net contribution of each firm within an economy.

    Learning Practice

  • 2.2.2

    Expenditure Method

    The Expenditure Method calculates GDP by assessing total spending on final goods and services in an economy during a specified time period.

    Learning Practice

  • 2.2.3

    Income Method

    The income method calculates a country's GDP by summing the incomes earned by factors of production, highlighting wages, profits, rents, and interest.

    Learning Practice

  • 2.2.4

    Factor Cost, Basic Prices And Market Prices

    This section explains the relationship between factor cost, basic prices, and market prices in the context of national income measurement in India.

    Learning Practice

  • 2.3

    Some Macroeconomic Identities

    This section discusses the calculation and significance of national income and the distinctions between GDP, GNP, NNP, and national income.

    Learning Practice

  • 2.4

    Nominal And Real Gdp

    This section discusses the concepts of nominal GDP and real GDP, explaining their significance in understanding economic growth and price changes over time.

    Learning Practice

  • 2.5

    Gdp And Welfare

    The section discusses the limitations of using GDP as a sole indicator of a country's welfare.

    Learning Practice

References

NCERT Study Material

Class Notes

Memorization

What we have learnt

  • Economic wealth is generate...
  • National income can be calc...
  • GDP does not fully capture ...

Final Test

Revision Tests

Chapter FAQs