As the circular flow of income explains, there is continuous flow of income from the households to the firms and from the firms to the households. The goods and services produced by firms lead to the generation of factor incomes which are distributed among households. This factor income gets translated into expenditures when households purchase the goods and services from firms. The expenditure provides revenue to the firms, which is used to produce goods and services. This circular flow in the economy continues. Therefore, the national income of a country can be looked upon by three ways: through the production of goods and services, through the generation of income and through expenditure on goods and services. This gives us three different methods of estimation: Finding the value added during the production of goods and services in the economy also known as the Product Method or Value Added Method Finding the total income generated in the economy also known as the Income Meth
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