The following financial statistics were extracted from the national income accounts of an economy for a given fiscal year: | Component | Amount (₦ million) | | :--- | :--- | | Compensation of employees | 410 | | Rent on property | 95 | | Net interest income | 70 | | Undistributed corporate profits a

The following financial statistics were extracted from the national income accounts of an … — JAMB UTME

The following financial statistics were extracted from the national income accounts of an economy for a given fiscal year:

Component	Amount (₦ million)
Compensation of employees	410
Rent on property	95
Net interest income	70
Undistributed corporate profits and dividends	135
Mixed income of self-employed individuals	110
Old-age pension payments	50
Consumption of fixed capital	40
Net factor income from abroad	30

Using the income method, calculate the Gross Domestic Product ( $GDP$ ) at factor cost in ₦ million.

Answer: 820 million

Answer

The Gross Domestic Product (

GDP

) at factor cost calculated using the income method is 820 ₦ million.

Under the income approach, Gross Domestic Product (

GDP

) at factor cost is derived by summing all domestic factor rewards: Compensation of employees (

₦410

m) + Rent (

₦95

m) + Net interest (

₦70

m) + Corporate profits (

₦135

m) + Mixed income (

₦110

m) =

₦820

million. Old-age pensions are excluded because transfer payments do not represent payment for current economic output. Consumption of fixed capital is not subtracted when computing Gross output, and Net factor income from abroad is excluded because the measure requested is domestic, not national.

Step-by-Step Solution

Identify and select factor income components earned from domestic production.

Factor incomes = Compensation of employees (

₦410

m), Rent (

₦95

m), Net interest (

₦70

m), Corporate profits (

₦135

m), and Mixed income (

₦110

m).

The income method sums all factor rewards earned by domestic owners of factors of production.

Filter out non-factor payments, depreciation, and foreign factor receipts.

Excluded items: Old-age pension payments (

₦50

m), Consumption of fixed capital (

₦40

m), and Net factor income from abroad (

₦30

m).

Transfer payments do not reflect current output; depreciation is not deducted for Gross income; and NFIA converts domestic aggregate to national aggregate.

Calculate total Gross Domestic Product at factor cost (

GDP_{FC}

GDP_{FC} = 410 + 95 + 70 + 135 + 110 = 820

million Naira.

Adding all earned domestic factor incomes yields total GDP at factor cost.

Key Concept

Income Method of Measuring National Income

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