NATIONAL INCOMENational income is the sum of the monetary value of the net flow of all goods and services produced by normal residents of a country during an accounting period. According to the Central Statistical Organization (CSO) 'National income is the sum of factor incomes earned by ordinary residents of a country in the form of wages, interest and profits in an accounting year.' National product is the net production of goods and services that flow during the year from the country's production system into the hands of final consumers or in the net addition to the country's capital goods. Methods of Measuring National Income In every economy the circular flow of production, income and expenditure remains in operation continuously due to economic activities. Production generates income which leads to the creation of demand for goods and services and therefore spending. National income can be measured at each stage of the circular flow of production, income and spending. In the production phase, the net value of final goods and services produced in the country in a year is calculated. It also includes net factor income earned from abroad. At the income level, the annual net factor income is added together with the net factor income from abroad. At the expenditure level, national income is measured by adding the net value of final expenditure and the net factor income from abroad. There are therefore three methods of measuring national income:1. Product method or value added method2. Income method3. Expenditure MethodNational Income MethodProduct Method or Value Added MethodThis is also known as "Inventory Method" or "Goods Service Method". This method approaches national income from the production side. According to this method the economy is... middle of paper... the country depends on the nature and condition of the economy as well as the purpose of undertaking this exercise? The best way to arrive at national income will be to use all three methods in a way that allows them to be cross-checked for greater accuracy and sheds more light on the details. Difficulties in Calculating National Income Although all methods are used almost in all countries to calculate national income but the calculation is a complex affair and is best with conceptual and statistical difficulties. Kuznets mentions the following difficulties: • Difficulty in defining the nation • Non-marketed services • Inapplicability of any method • Which stage to choose • Scarcity of statistics • How to avoid double counting • Identification of transfer payments • Self-consumed production • Multiple occupations • Incorrect statistics