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Uses Of National Income, Issues of Measuring National Income - Coggle…
Uses Of National Income
1) Standard of Living Indicators
Can be measured by GDP per capita
Household will get more benefits
Different perspective on the standard of living
a) to compare the standard of living over time
b) to compare the standard of living across countries
2) Government Planning and Policies
Can guide the policymakers in planning for the future
Government can view the historical trends and performances of the economic sectors
Government can take necessary measures to improve the current level of the economy
3) Sectoral Contributions
Sectors of economic activities
Secondary sector- manufacturing and constructing
Primary sector- agriculture, forestry, mining, and qurrying
Tertiary sector- electricity, gas and water, wholesale and retail trade, transport
International Comparison
Compare the absolute size of one economy relative to another
Compare how well off the average individuals in each countries
Issues of Measuring National Income
Problems of non-monetized sector
Non-monetize sector is a challenge to measure national income
Example: Agriculture sector
Large quantity of output do not reach the market
The outputs are either consumed directly bu farmers or exchanged it for other products
Underground Economy
Underground economy caused the GDP to be underestimate
Any underground economy activities may cause a loss in government income revenues and sales.
Non-market Transaction
Productive work which do not involve payment is non-market transaction
Example: food grown in backyard, home repairs, clothes sewn at home. The activities is for themselves or family members
No money changes hands and no payment recorded
Problems of Expertise and Modern Machinery
Lacks of professionals- statisticians, researchers, programmer, and analyst is major problem in third world countries
Professionals are needed to estimate the national data accurately
Non-availability of modern machinery- advanced computer or programs to compute national income
Machinery will be used to analyzed national income data
Problems of Double Counting
Appear when both values of final goods and intermediate goods are included
GDP only includes the final goods value