If an economy is in equilibrium at the point where plans to save and to invent are equal, then government expenditure must be. It deals with individual income, individual prices and individual outputs, etc. The real difficulty arises from the fact that dissimilar things cannot be added up. In fact, these activities add to production when we engage the services of a lady ayah who takes care of a child against some monetary payments. If saving exceeds investment, the national income will a Fall b Rise c Fluctuate d Remain constant 9. Stenographer's Exam, 1994 a Bihar b Madhya Pradesh c Maharashtra d Uttar Pradesh 14. The net output emerging from production process gets distributed among factors of production in the form of money income rent, wages, interest and profit.
This method takes into account only those goods and services that purchased and consumed by the final consumers in the economy. Alternatively following items of expenditure should not be included. In the absence of market prices for many types of public services, the problem of their valuation must be somewhat arbitrarily settled by accounting conventions. As a matter of fact, different methods are being adopted for different sectors. National Policies: National income data form the basis of national policies such as employment policy, because these figures enable us to know the direction in which the industrial output, investment and savings, etc.
This leads to over estimation of the value of goods and services produced. It studies not an individual economic units like a household or a firm or an industry i. As per the 1999-2000 Budget estimates which tax was estimated to yield the maximum revenue? High rate of growth of population 3. Which one of the following States produces about 50 percent of th' total silk textiles in India? Goods purchased for consumption or for investment are final goods. Which state has the maximum number of people living below the poverty line? Similarly, it is difficult to estimate the contribution made to value added by profits earned on irrigation and power projects. Public Services Another problem is whether the public services like general administration, police, army services, should be included in national income or not. Many useful services are produced by members of households for the benefit of themselves or their families.
National income estimates are faulty in terms of their conceptual approach as well. Add undistributed profit of companies, income from government property, and profits from public enterprises. The Bowley-Robertson Committee has suggested the adoption of the Census of Products Method for major sectors of India, and the Census of Income Method for some minor sectors, while the National Income Committee relied mainly upon the Census of Income Method. If depreciation is deducted from the gross value added, we have net value added which comes to Rs. The value obtained is the gross domestic product.
Wages, proprietor's incomes, and corporate profits are the major subdivisions of income. Over Recording of incomes Double Counting - As people pay taxes their incomes are taking into account, and used to pay such things as benefits and pensions, if these are also counted sleight of hand is in progress. This is included in national income. M Private Income : Private income is income obtained by private individuals from any source, productive or otherwise, and the retained income of corporations. Which of the following are the main sources of state finances? Distinction between microeconomics and macroeconomics. The table below clearly explains this method: Producers Stage of Production Selling Price Rs.
On the contrary, with the fall in the price level, the national income also falls, though the national production might have increased. Interest on national or public debt is also considered a transfer payment because it is paid by the government to individuals and firms on their past savings without any productive work. But in national income estimates, this is not so. The Value Added Method In the value added method of measuring national income, the value of materials added by producers at each stage of production to produce the final good is considered. This is what is called underground or black economy. They are briefly described below.
Although some attempts were made to estimate national incomes as long ago as the 17th century, the systematic keeping of , of which these figures are a part, only began in the 1930s, in the United States and some European countries. In their case, it is very difficult to find out the different inputs provided by the owner himself. Measuring of National Income Problem 10. Measuring of National Income Problem 4. But the problem is of estimating the current depreciated value of, say, a machine, whose expected life is supposed to be thirty years. And, as a result, a company will have to pay more taxes than it is supposed to pay. All these pose problems in developing countries while calculating national income.
National income is the same as a Net Domestic Product at market price b Net Domestic Product at cost factor c Net National Product at market price d Net National Product at factor cost 29. Therefore, it is necessary to cover up these gaps for more efficient economic planning and social accounting. However, in theory, such income is a part of national income. If we consider the example of piano or overcoat, as given by Fisher, only the services rendered for use during one year by them will be included in income. Personal income differs from private income in that it is less than the latter because it excludes undistributed corporate profits. Therefore, the national income does not reveal disclose a true picture of the real income of the country.