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MEASURING NATIONAL INCOME AND OUTPUT - Coggle Diagram
MEASURING NATIONAL INCOME AND OUTPUT
USES OF NATIONAL INCOME STATISTICS
GOVERNMENT PLANNING AND POLICIES
Government can view the historical trends and performances of the economic sectors.
Government can take necessary measures to improve the current level or take the right corrective actions.
SECTORAL CONTRIBUTIONS
The policymakers can recognize which economic sectors are more or less likely contributing.
The service sector is the key driver contributing meanwhile the primary sector is the key contributor in less developed countries.
STANDARD OF LIVING INDICATORS
can be measured by GDP per kapita.
the more goods and services that households benefit, the higher the increase in consumption opportunities.
can be compared based on two different perspectives which is to compare the standard of living over time and to compare the standard of living across countries.
INTERNATIONAL COMPARISONS
To make international comparisons of people's living standards or real income
we can compare the absolute size of one economy relative to another and how well off the average individual is in each country.
PROBLEMS OF MEASURING NATIONAL INCOME
UNDERGROUND ECONOMY
Those who do not disclose their incomes or underestimate their incomes to avoid paying the higher taxes may cause a loss in government income revenues and sales.
NON-MARKETS TRANSACTIONS
A number of productive work is carried out in the economy which do not involve payment
During this transactions, no money changes hands and subsequently no payment are recorded.
PROBLEMS OF NON-MONETIZED SECTOR
the output consume directly or exchanged for other good and services. This makes it difficult to measure the national income
The existence of a large number in the agricultural sector, make computation of national income more challenging due to fact large quantity do not reach the market.
PROBLEMS OF EXPERTISE AND MODERN MACHINERY
The lack of professionals is a major problem in third world countries because the service from them are very important in estimating the national income.
Another challenge faced is the non-availability of modern machinery to compute national income data. Data collected has to be analyzed using sophisticated machinery.
PROBLEMS OF DOUBLE COUNTING
Appear when both values of final goods and intermediate goods are included which some of components are bought and sold over a number of times.
To avoid, GDP includes only the value of final goods. Inclusion of the value of intermediate goods will distort the value of the GDP.