How do you measure national income? and why do countries need to measure it?

When calculating a countries GDP what would you do with the following, add or subtract..?

• Do you need to add or subtract the following: Gross Capital Formation Fixed Capital Consumption Net factor income from the ‘rest of the world’ Indirect taxes on domestic products and imports minus subsidies statistical discrepancy between output measure of GDP and expenditures approach of £m 635. Also which of the following areas would they come under: C = Consumer Spending I = Investment made by industry E = Excess of Exports over Imports G = Government Spending Any help much appreciated.

• Answer:

  Gross Capital Formation (Investment) (I) - add if using expenditure approach not counted if use income approach. Fixed Capital Consumption (Depreciation) - Add if using income approach and is not counted if use expenditure approach (because you calculate GDP, Gross but not NDP, Net) - is part of investment (I) Net factor income from the ‘rest of the world’ - not counted for both methods - but is required to calculate national product (not domestic) Indirect taxes on domestic products and imports minus subsidies - Add if using income approach and is not counted if use expenditure approach - but later constitutes part of gov expenditures (G) Statistical discrepancy between output measure of GDP and expenditures approach - depends on which direction you move - for one method you should add, but for another substract...