Match each national income component under the income method of measurement with its correct definition or accounting scope.
- Compensation of EmployeesTotal gross reward paid to workers, including wages, salaries, bonuses, and employer social security contributions.
- Operating SurplusThe total property and entrepreneurial income comprising profits, rent, and net interest of incorporated businesses.
- Mixed Income of Self-EmployedCombined return to labor and capital earned by sole proprietors where individual factor earnings cannot be distinguished.
- Net Factor Income from AbroadThe difference between factor income earned by citizens from abroad and factor income paid to foreign residents domestically.
Answer
Compensation of Employees corresponds to total gross rewards paid to workers. Operating Surplus corresponds to property and entrepreneurial income (profits, rent, interest). Mixed Income of Self-Employed corresponds to the combined unseparated earnings of sole proprietors. Net Factor Income from Abroad corresponds to net income flows earned from abroad versus paid to foreigners.
Under the income method of measuring national income, total national output is measured by summing all rewards paid to the factors of production: Compensation of Employees (labor reward), Operating Surplus (capital and land returns to incorporated firms), Mixed Income (unseparated returns for self-employed individuals), and Net Factor Income from Abroad (external net income balance). Each concept precisely matches its respective functional component in national income accounting.
Step-by-Step Solution
Key Concept
Factor Income Classification under the Income Method