| Consider the following statements about three methods of calculating national income: |
| 1. The income method, which adds up all incomes received by the factors of production generated in the economy during a year. |
| 2. The output method, which is the combined value of the new and final output produced in all sectors of the economy, including manufacturing, financial services, transport, leisure and agriculture. |
| 3. The expenditure method, which adds up all spending in the economy by households and firms on new and final goods and services by households and firms. Which of these explanations are correct? |
A) 1 and 2
B) 1 and 4
C) 1, 2 and 3
D) 1, 2, 3 and 4
Correct Answer: C
Solution :
[c] The income method, which adds up all incomes received by the factors of production generated in the economy during a year. This includes wages from employment and self-employment, profits to firms, interest to lenders of capital and rents to owners of land.
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