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Income Approach to Calculating GDPThis approach calculates National Income, NI. NI is the sum of the following components: Labor Income (W) Rental Income (R) Interest Income (i) Profits (PR) NI = W + R + i + PR Labor Income (W): Salaries, wages, and fringe benefits such as health or retirement. This also includes unemployment insurance and government taxes for Social Security. Rental Income (R): This is income received from property received by households. Royalties from patents, copyrights and assets as well as imputed rent are included. Interest Income (i): Income received by households through the lending of their money to corporations and business firms. Government and household interest payments are not included in the national income. Profits (PR): The amount firms have left after paying their rent, interest on debt, and employee compensation. GDP calculation involves accounting profit and not economic profit. View an Example
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