The Income Approach II

Corporate profits form an essential component of national income under the income approach. This component reflects the income earned by corporations.

Net interest is another item of income. It primarily refers to the net interest paid by the private business sector that arises from economic production.

The next item of income is Net business current transfer payments, which are the net payments by businesses to others for which no current services are performed—such as donations to charitable organizations.

Following that are Taxes on production and imports, which primarily include indirect business taxes such as excise taxes and sales taxes collected by the government.

Finally, the Current surplus of government enterprises refers to the income earned by government-owned businesses, such as the United States Postal Service.

Under the income approach, these five components, when added to the three previously discussed categories of compensation of employees, proprietors’ income, and rental income of persons, comprise national income.