Looked at from the point of view of national income accounting, the problem is fairly simple. The best approach is to study the generation of income by various types of expenditure. Income-creating expenditures can be classified under three major headings: domestic private consumption, domestic private net investment, and domestic government expenditures on goods and services. Part of each of these, however, is a payment for indirect taxation which does not create income for factors of production at home, and therefore has to be deducted from the total. On the other hand, government subsidies, which enable goods and services to be purchased at less than factor cost, should be added to total expenditure; for they too form part of the incomes of factors of production. A part of each category of expenditure may also be spent on goods and services supplied by foreign countries and thus fail to generate income at home. This too should be deducted. On the other hand, foreign residents' and government expenditures on goods and services produced at home contribute to the creation of incomes of domestic factors of production, and hence should be added to the domestic income-creating expenditures. The national income, as earned by the domestic factors of production in their participation in the productive process, may therefore be said to equal the sum of domestic private consumption plus domestic private net investment plus domestic government expenditures on goods and services minus indirect taxation plus subsidies minus imports plus ex-