Question

what are the uses and limitations of national income statistics?

Answer 1

What are the uses and limitations of national income statistics?

National income refers to the monetary value of all the goods and services produced in a country in a given financial year.It is the final outcome of all the economic activities of a country.It is usually measured yearly,and the period is called as a financial year.National income takes into consideration production,income and expenditure view point of the economy.

Let us have a look at the uses of National Income Statistics.

1. National Income Statistics provides information about the economic performance of a country in a given financial year.
2. Using the information on the economic performance of the country,it helps to compare the same with other countries.
3. National Income Statistics provide crucial information to the policy makers,which use it for formulating econic as well as budgetary policies.
4. It helps to measure the standard of living of the people in the country.
5. National Income Statistics is used for measuring the economic growth of the country.
6. It provides information about the input from the various sectors of the economy towards the National Income.
7. It provides a complete breakdown on consumer as well as government expenditure.
8. National Income Statistics provides information on the distribution of income in the economy.

Let us now see what are the limitations of National Income Statistics

1. It is not possible to accurately measure the economics activity of the entire country.People fail to provide complete and acuurate information.
2. There is a lot of ecnomic activity which takes place but it is not reported to the authorities.Thus it becomes difficult to get accurate figures.
3. National Income Statistics only consider the activities which are paid.It excludes do it youself work or the work done by housewives.If in an economy there is a rise in these activities,it will not provide accurate figures.
4. A rise in national income may not necesariily mean rise in standard of living.Increased spending on items of defence,or rise in externalities does not improve the standard of living.
5. National Income only takes into consideration,market activity but not welfare.Different situations which may have a negative impact on people which may induce their spending,increased spending will show an increase in spending but not in welfare.