The basis of the difference in income and product method of National Income Accounting is best deciphered by which of the following?

1. Product method measures the aggregate value of final goods and services produced by all the firms.
2. Income method measures the sum total of consumption expenditure.
3. Product method refers to the final consumption expenditure on the goods and services produced by the firm.
4. Income method refers to the fixed cost of the goods and services produced by the firm.

Option 1 -> Correctly describes the product method as measuring aggregate value of final goods and services produced.

Option 2 -> Incorrect - Income method measures factor incomes (wages, rent, interest, profits), not consumption expenditure.

Option 3 -> Incorrect - This describes expenditure method, not product method which focuses on production.

Option 4 -> Incorrect - Income method refers to factor incomes, not fixed costs of production.

Hence, Option 1: Product method measures the aggregate value of final goods and services produced by all the firms -> The product method (or output method) calculates national income by measuring the total monetary value of all final goods and services produced within an economy during a specific period. It focuses on the production side and uses value-added approach to avoid double counting. In contrast, the income method calculates national income by summing all factor incomes (wages, rent, interest, and profits) earned in the production process. This option correctly captures the fundamental basis of the product method, which differentiates it from the income method that focuses on earnings rather than output. -> correct