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Problems of Measuring National Income (NI), SITI MARYAM IRWANI BT MUHSEIN …
Problems of Measuring National Income (NI)
Problems of non-monetized sector
Usually arise in most of third world country
Especially in agriculture sector, makes computation of the NI more challenging.
The output are either consumed directly by farmer or exchanged for other goods and services
This makes it more difficult to measure the NI
Underground economy
Official GDP estimated may not take into account the underground economy, in which transaction contributing to the production such as illegal trade and tax avoiding activities, are not reported, thus causing the GDP to beunderestimated
Those who do not disclose their incomes or underestimate their incomes to avoid paying higher taxes may cause a loss in government income revenues and sales, which arr not reflected in the GDP
Non market transaction
A number of productive work is carried out in economy which do not involve payment.
During these transaction, no money changes hands subsequently no payment are recorded
Problems of expertise and modern machinery
The lack of professionals is a major problem in third world countries
Statistician
Researchers
Programmers
Analysts
The services of these professionals are very important in estimating the NI data accurately with minimum errors.
Non availability of modern machinery
Advanced computers
Programs to compute NI data
Problems of double counting
Double counting in NI will appear when both values of final goods and intermediate goods are included
As most products go through a series of production stages before they reach the market, some of their components are bought and sold over a number of times
To avoid this problem, GDP includes only the value of finals goods and ignores intermediate goods altogether
Intermediate goods will amount to multiple counting which will distort the value of the GDP
SITI MARYAM IRWANI BT MUHSEIN
KBA2462A
2019476188