For measuring GNP at market price, the economists use Expenditure Approach. According to this approach:

There are four categories of expenditures which are added together to measure gross national product (GNP) at market price,

(i)             Consumption,

(ii)          Investment

(iii)       Government expenditure and

(iv)       Net exports.

These four types of expenditures are now explained in brief:

(i) Consumption Expenditure (C): It includes all personal expenditure incurred by the citizens of a country on 'durable and non-durable goods in a period of one year.

(ii) Investment (I): It is the total expenditure incurred by firms or households on capital goods.

(iii) Govt expenditures (G): It includes all types of expenditure incurred by Central, Provincial, and Local Councils on e purchases of goods and services such as national defence, law and order, street lighting etc.

(iv)  Exports (X - M): Net 'exports of goods and are value of exports minus the value of G = C + I + G + (X - M)

Where

C = consumption, I = investment, G = Govt expenditure and (X - M) = Net exports. This constitutes aggregate demand (AD)

Aggregate demand (AD) is the total demand for goods and services produced in the economy over a period of time.

Therefore National income can be estimated in terms of either output or total income. When national income is measured by adding together all income payments made to the factors of production in a year, it is called National Income at Factor Cost.

National income (NI) or national income at factor cost is the aggregate earning of the four factors of production (land, labour, capital and organization) which arise from the current production of goods and services by the nations' economy".