How is National Income calculated?

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justaguide eNotes educator| Certified Educator

The National Income is one of the ways by which economists measure the economic activity in a nation. This allows, among many other objectives, governments to analyze how the economy is doing and what are the steps that should be taken to make things better.

The standard way of calculating National Income in economics is by finding the sum of the income of employees and proprietors, income made by renting out property, income made by interest received from deposits in financial institutions minus the interest paid to financial institutions for money borrowed, payment made for use of property by a business, depreciation of assets, indirect business taxes, capital consumption, business profits and the net subsidies of government enterprises.