National income is found by measuring the total value of final goods and services produced by a country in one year
It can be calculated using the product method, income method, or expenditure method
Product method: sum the value added by all sectors of the economy
Income method: add all factor incomes such as wages, rent, interest, and profit
Expenditure method: add consumption, investment, government spending, and net exports
Gross Domestic Product is first calculated
Net factor income from abroad is added to GDP to get Gross National Product
Depreciation is subtracted from Gross National Product to get Net National Product
Indirect taxes are subtracted and subsidies are added to get National Income
National income can also be expressed as Net National Product at factor cost
The formula is: National Income = NNP at factor cost
The formula can also be written as: National Income = GDP + Net factor income from abroad – Depreciation – Indirect taxes + Subsidies