Production/Income/Expenditure
1.7 It may be noted from the above discussion that the national income of
a country can be measured in three different ways, from the angle of
production, from income generation and from final utilization. These three
forms are circular in nature. It begins at the production stage where the
productive units engage capital and labour and turn out goods and services,
the total measure of which gives the national product. This production
process generates a given amount of money income which is distributed by
the productive units to the factors of production, namely, capital and labour.
The measure of income this way indicates the share of national product
distributed to the factors of production or in other words the national income
by factor shares. The income thus received by the factors of production is
then spent either by the labour in their capacity as households in terms of
acquisition and consumption of goods and services or by the producers in
acquiring more capital and thus increasing the physical assets of their
production units. The national income by definition is the same whether
measured at the point of production or at the point of income generation or at
the point of final utilisation. In other words the total of net output, income
flows and final expenditure will be identical. The significance of each arises
from the fact that they reflect total operations of the economy at the levels of
three basic economic functions, namely, production, distribution and
disposition. [Reproduced from CSO publication]
1.7 It may be noted from the above discussion that the national income of
a country can be measured in three different ways, from the angle of
production, from income generation and from final utilization. These three
forms are circular in nature. It begins at the production stage where the
productive units engage capital and labour and turn out goods and services,
the total measure of which gives the national product. This production
process generates a given amount of money income which is distributed by
the productive units to the factors of production, namely, capital and labour.
The measure of income this way indicates the share of national product
distributed to the factors of production or in other words the national income
by factor shares. The income thus received by the factors of production is
then spent either by the labour in their capacity as households in terms of
acquisition and consumption of goods and services or by the producers in
acquiring more capital and thus increasing the physical assets of their
production units. The national income by definition is the same whether
measured at the point of production or at the point of income generation or at
the point of final utilisation. In other words the total of net output, income
flows and final expenditure will be identical. The significance of each arises
from the fact that they reflect total operations of the economy at the levels of
three basic economic functions, namely, production, distribution and
disposition. [Reproduced from CSO publication]
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