An economic statistician evaluating a nation's performance via the income approach compiles the following components for a given year:
- Compensation of employees: \text{\mathbb{N}}380\text{ million}
- Operating surplus (rent, interest, and profit): \text{\mathbb{N}}210\text{ million}
- Mixed income of self-employed individuals: \text{\mathbb{N}}90\text{ million}
- Net factor income from abroad (NFIA): \text{\mathbb{N}}-15\text{ million}
- Transfer payments to households: \text{\mathbb{N}}40\text{ million}
What is the Gross Domestic Product at factor cost () for this economy using the income method?
- ₦680 millionAnswer
- B₦720 million
- C₦665 million
- D₦705 million
Answer
The Gross Domestic Product at factor cost using the income method is ₦680 million.
Under the income method of measuring national income, Gross Domestic Product at factor cost () equals the sum of all factor rewards earned within the domestic boundary: Compensation of Employees + Operating Surplus + Mixed Income of Self-Employed. Evaluating the given figures gives \text{\mathbb{N}}380\text{ million} + \text{\mathbb{N}}210\text{ million} + \text{\mathbb{N}}90\text{ million} = \text{\mathbb{N}}680\text{ million}. Transfer payments are excluded because they are unearned receipts, and NFIA is omitted because the question specifies GDP rather than GNP.
Step-by-Step Solution
Key Concept
Calculation of GDP at Factor Cost via Income Approach