Learn all three methods of calculating national income — expenditure, income, and value-added — and master the precautions that prevent double counting and inclusion errors.
National income can be measured using three equivalent approaches, each looking at the economy from a different angle. The Expenditure Method adds up all final spending in the economy: private consumption (C), gross investment (I), government expenditure (G), and net exports (X − M). The Income Method sums all factor incomes earned during production: wages, rent, interest, and profit (plus mixed income). The Value Added Method (Product Method) adds up the value added at each stage of production across all industries, effectively counting only the net contribution of each producer to avoid double counting intermediate goods.
All three methods should theoretically yield the same GDP figure since every rupee of output generates a rupee of income and a rupee of expenditure. In practice, students must learn the precise precautions for each method — for example, excluding transfer payments and second-hand goods from the expenditure method, excluding imputed rents on owner-occupied housing from the income method if not included consistently, and using only intermediate consumption to compute value added. CBSE numericals frequently require choosing items from a given list and computing GDP or NI correctly.