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- There are three methods of calculating national income, and they are all conceptually equivalent to each other. They are (a) output method, (b) the expenditure method, and Cc) the income method. The output method is followed either by valuing all the final goods and services produced during a year or by aggregating the values imparted to the intermediate products at each stage of production by the industries and productive enterprises in the economy. The sum of these values added gives the gross domestic product at factor cost, which after a similar adjustment to include net factor income from abroad gives gross national product at factor cost. The expenditure method aggregates all money spent by private citizens, firms and the government within the year, to obtain total domestic expenditure at market prices. It aggregates only the value of final purchases and excludes all expenditures on intermediate goods. However, since final expenditure at market prices include both the effects of taxes and subsidies and our expenditures on imports while excluding the value of our exports, all these transactions have to be taken into account before we obtain gross national product by this method. The income approach to measuring national income does not simply aggregates all incomes. It aggregates only incomes of residents of the nation, corporate and individual, that obtain income directly from the current production of goods and services. It aggregates the money payments made to the different factors of production, i.e. factors income and excludes all incomes which cannot be considered as payment for current services to production.