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In: Economics

1. Discuss uses of National Income 2. Identify and explain Problems of National Income 3. Identify...

1. Discuss uses of National Income
2. Identify and explain Problems of National Income
3. Identify and discuss how monetary policy can overcome inflation or deflation
4. Discuss types of unemployment
5. Identify and explain Tools of protectionism

Solutions

Expert Solution

1.
There are different uses of the national income estimate. The first use is the evaluation of the performance of the economy over a period of time. It helps to identify the direction of the economy, growth rate and the inherent reasons for the status of the economy and its resulting national income. The second use is the comparison of the national income and resulting per capita income between the nations. It is used to identify and rank the economy on the basis of the national income data. The third use is the identification and analysis of the sectoral contribution in the national income. It helps the government to make suitable policies to improve the sector and its contribution in the national income. The fourth use is the formation of the economic policies based upon the national income, future projections and the gap between the potential and the actual national income over a period of time.


2.


The first problem associated with the national income is its inability to consider the work done by people at their home. For example, cleaning work done by the housewives at home is not assigned a monetary value. So, it is not considered as the part of national income. The national income does not consider the economic transactions of the underground economy or that are evaded from the regulations of the income tax authorities. It is considered as another problem. The third problem is misleading view about the social well-being. Rising per capita income, does not mean that people are getting richer. It may be the concentration of money in a few hands. So, it is deceptive in nature. Further, national income does not give indication about the income equality among the people.

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