In ________ method of calculating national income, we calculate the aggregate annual value of goods and services produced (if a year is the unit of time).

The correct answer is product.Key Points

• The method of calculating national income by considering the aggregate annual value of goods and services produced is known as the production or product method.
• It is one of the three methods used for calculating national income, the other two being the income method and the expenditure method.
• In the income method, national income is calculated by adding up the income earned by all factors of production in a year, while in the expenditure method, national income is calculated by adding up the total expenditure on goods and services in a year.
• The loan option mentioned in the question is not a method of calculating national income.
  • Loans are a liability and do not contribute to the production of goods and services.
• The purchase option is also not a method of calculating national income.
  • Purchases refer to the buying of goods and services and do not take into account the value of production.
• The tax option is also not a method of calculating national income.
  • Taxes are levied on income, expenditure, and production, but they do not contribute to the calculation of national income.

Additional Information

• The production method is based on the value-added approach, which means that the value of the final product is calculated by subtracting the value of the intermediate goods and services used in its production.
• The income method takes into account the income earned by all factors of production, including wages, salaries, rent, interest, and profits.
• The expenditure method considers the total expenditure on goods and services, including consumption expenditure, investment expenditure, government expenditure, and net exports.
• National income is a measure of the total income earned by the residents of a country in a year and is used to assess the economic performance of a country.