In: Economics
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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