Measurement of National Income

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  • Q1

    What are the methods used to avoid double counting?

    Marks:2
    Answer:

    The methods used to avoid double counting are:
    1) Final Output Method- Only final goods and services are to be considered in the estimation of GDP. Intermediate goods are not to be considered.
    2) Value Added Method- The difference between value of output and the value of intermediate consumption of each producing unit in the country is to be considered.

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  • Q2

    Why are net imports deducted while computing national income by expenditure approach?

    Marks:2
    Answer:

    Expenditure on imports of goods and services is part of the aggregate spending by the residents of a country, these goods and services are the part of the domestic product of the other country. When resident of India imports goods and services from other countries, this adds to the demand for goods and service of other countries. Thus, net imports are deducted while computing national income by expenditure method.

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  • Q3

    What is the significance of measuring national income by all three methods?

    Marks:2
    Answer:

    It is essential to measure national income by all the three methods, because it gives complete view of the economy from the points of structure of production, income distribution and pattern of expenditure. All the three methods give us the same national income figure and we can cross-check the accuracy of other methods.

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  • Q4

    Why the service of the housewife not included in the calculation of national income?

    Marks:1
    Answer:

    The services of the housewife are produced and consumed at home and never enter the market place. Thus, there is no way of evaluating these services.

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  • Q5

    State the three methods of measuring national income.

    Marks:1
    Answer:

    The three methods of measuring national income are:
    i) Value added method
    ii) Income method
    iii) Expenditure method

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