How is equality of three methods? Reconcile three methods of measuring national income. - Zigya
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How is equality of three methods? Reconcile three methods of measuring national income.


Equality (or Reconciliation) of Three Methods
We have seen that national income can be measured by three different methods, namely, value added method, income method and expenditure method. National income may be computed by any method, the answer will be the same because it is the same physical output, i.e., net flow of final goods and services which is being looked at from three different angles. For every amount of goods and services produced, the same amount of income is generated and the same amount of final expenditure incurred. Thus national income by definition is the same whether measured by production method or income method or expenditure method. In other words, total arrived at by each method will be identical. To prove equality, let us take a common aggregate, say, GDPMP (Gross Domestic Product at Market Price) because in expenditure method, the basic aggregate is GDP at market price (MP). Remember whereas value added and income are measured at FC, expenditure is measured at MP therefore, adjustment should be made to equate FC and MP. The following table shows reconciliation of three methods reflecting equality of GDP figures.

Equality (or Reconciliation) of Three MethodsWe have seen that nation


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