Assignment on national income. Assignment on National Income: GDP • Student Homework Help 2022-10-03
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National income is a measure of the total value of all goods and services produced in a country over a specific period of time, usually a year. It is an important economic indicator that reflects the overall health and well-being of a nation. There are several different approaches to measuring national income, each with its own advantages and limitations. In this essay, we will discuss the various methods of calculating national income, the importance of national income in economic analysis and policy-making, and the challenges in accurately measuring national income.
One of the most widely used methods for calculating national income is the Gross Domestic Product (GDP). GDP measures the value of all final goods and services produced within a country's borders, regardless of who produces them. It is calculated by adding up the value of all goods and services produced, including the value of exports and subtracting the value of imports. GDP is a useful measure of national income because it provides a comprehensive view of a country's economic output and can be compared to other countries' GDPs to gauge economic growth and development. However, GDP has some limitations as a measure of national income. It does not take into account the value of unpaid work, such as household work or volunteer work, and it does not consider the distribution of income within a country.
Another approach to measuring national income is the Gross National Product (GNP). Like GDP, GNP measures the value of all goods and services produced within a country. However, it includes the value of goods and services produced by foreign-owned businesses operating within the country, as well as the value of goods and services produced by domestic businesses operating abroad. GNP is useful because it reflects the economic contributions of a country's citizens, regardless of where they are located. However, it has the disadvantage of not accurately reflecting the economic activity within a country's borders.
A third method for calculating national income is the Net National Product (NNP), which is calculated by subtracting the value of depreciation from the GNP. Depreciation is the decline in value of a country's capital assets, such as machinery and buildings, due to wear and tear over time. NNP is a measure of the net value of a country's economic output, taking into account the loss in value of its capital assets.
National income is an important economic indicator because it reflects the overall health and well-being of a nation. It provides a comprehensive view of a country's economic output and is used to gauge economic growth and development. It is also a useful tool for policy-makers, who can use national income data to make informed decisions about economic policy and resource allocation.
However, measuring national income is not without its challenges. One major challenge is accurately accounting for the value of unpaid work, such as household work or volunteer work. These activities contribute to the overall well-being of a society, but they are not reflected in traditional measures of national income. Another challenge is accounting for the underground economy, which includes illegal and informal economic activities that are not reported to the government. These activities can significantly impact a country's national income, but they are difficult to accurately measure.
In conclusion, national income is a valuable economic indicator that reflects the overall health and well-being of a nation. It is an important tool for economic analysis and policy-making, but it has its limitations and challenges. Accurately measuring national income requires taking into account the value of unpaid work, the underground economy, and the distribution of income within a country.
The additions include transfer payments such as pensions, unemployment allowances, and sickness and other social security benefits, gifts and remittances from abroad, windfall gains from lotteries or from horse racing, and interest on public debt. But expenditure on transfer payments is not added, because these payments are not in exchange for goods and services produced during the current year. Secondly, different countries have different needs and tastes which cannot be easily taken into account in making comparisons. Out of the value of total output of each sector is deducted, the value of its intermediate purchases or primary inputs to arrive at the value added for the entire economy. Consequently, the national income cannot be calculated correctly. NORBULING RIGTER COLLEGE Affiliated to Royal University of Bhutan DOTENG, PARO, BHUTAN Title of the Assignment : Application based assignment Module Code and Name : ECN202 Macroeconomic Module Tutor : Mr. The CPI or RPI is: In this CPI or RPI, 1992 is the base year.
A person who rents a house is buying housing services and is providing income for the landlord; the rent is part of GDP, both as expenditure by the renter and as income of the landlord. Three of these adjustments are important. But expenses on defence equipment are treated as consumption expenditure because they are consumed during a war as they are destroyed or become obsolete. Since, GNP is produced by the joint efforts of factors of production, thus these factors have a legitimate claim on this product and the income generated in the production process. On this basis, national income has been defined in a number of ways. Let us first consider the expenditure side of the national income account.
Concepts of National Income 3. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts. If the prices increase at a high rate, the real GNP may even fall. Similarly, the sale and purchase of old stocks, shares, and bonds of companies are not included in national income because they were included in national income when the companies were started for the first time. The GDP deflator is the price of bread in that year relative to the price of bread in the base year. It includes expenditure on house construction, factory-buildings, all types of machinery, plants and capital equipment. Wars, strikes and social unrests will discourage investment and business activities.
Its calculation is shown in Tables 1, 2 and 3. He might be contributing his capital, land, labour and his abilities in the business. Domestic income includes: i Wages and salaries, ii Rents, including imputed house rents, iii Interest, iv Dividends, v Undistributed corporate profits, including surpluses of public undertakings, vi Mixed incomes consisting of profits of unincorporated firms, self-employed persons, partnerships, etc. However, the following challenges may be faced when carrying the comparisons: different in currencies, different goods and services, disparity in income distribution and difference in tastes and preferences. Our business writers have a lot of experience in the field. The first key identity is that output produced and output sold. However, there are several reasons for which the GNP cannot be considered as good index of economic welfare.
Fortunately, our computer science experts are up to the match. In other words, it is the sum of Gross Value Added. A Problems in Income Method: The following problems arise in the computation of national income by income method: 1. It may last longer or for a shorter period. The some argument applies if output has been increased only through the work-force taking fewer hours of leisure and putting more hours of work. But the problem is of estimating the current depreciated value of, say, a machine, whose expected life is supposed to be thirty years.
Concepts And Meaning Of National Income Economics Essay
Assignment: Read and make short notes on Output approach refer to Inventor book three pages 65 — 66. Are your Our essay writers are graduates with bachelor's, masters, Ph. The GDP deflator measures the price of the typical unit of output relative to its price in the base year. It, therefore, becomes difficult to measure in money the service-value of these goods from the point of view of consumption. Out of this value added, the major portion goes in the form of wages and salaries, rent, interest and profits, a small portion goes to the government as indirect taxes and the remaining amount is meant for depreciation. Consumption expenditure is denoted by C and investment spending as I. Second, we increase the national income by the net amount the government pays out in transfer payments.
Based on these 3 directions of flows, i. The government provides a number of services, such as police and military services, administrative and legal services. Actual economies produce many goods. So, to avoid duplication, the value of intermediate products used in manufacturing final products must be subtracted from the value of total output of each industry in the economy. Economic Planning: In the present age of planning, the national data are of great importance. The firms use the factors of production to produce many different goods and services which they sell to households, foreigners, the government and other firms and receive in return the values of goods and services they produced.
Assumptions of National Income Assignment Homework Help Tutor
If all such differences are added up for all industries in the economy, we arrive at the GNP by value added. You have unlimited revisions. And to this, must be added income from abroad. Uses of National Income Statistics Standard of Living The per capita GNP allows us to compare the standard of living of different nations. It also includes the expenditure on government enterprises. Since people consume more bread then chicken, the price of bread should have a greater weight in the CPI or RPI than the price of chicken.