Question

a) Explain 5 major uses of national income statistics

b) Explain 3 major limitations of national income statistics

c) Distinguish between market price and factor cost

Answer 1

Answer a. 5 major use of national income statistics are

-to calculate per capital income

-to understand distribution of income

-to measure the rate of growth of A country

-to compare standard of living in different countries

-to estimate inflationary and deflationary pressures.

Answer b. 3 major limitations of national income statistics:

-decisions are made what to be included in consumption or government spending but minor discrepancies will always arise

-gdp only measure market activities and doesn't take the welfare into account.

-errors in measurements like black marketing and underground activities are not included while calculating GDP.

Answer c. Factor cost is the total amount which the manufacturers or producers had to invest in the production of A good. It doesn't include any tax on final product. While market price is the final cost at which the manufacturer sells the good to consumer. Market price includes all the taxes. Market price is ultimately paid by the end user of the product.