Question

Discuss the importance of national income statistics to the government of a country and explain the distinction between national income at market price and national income at factor cost

Answer 1

I) National income statistics helps to conduct a useful analysis considering the structure of the economy by the government.

• It helps  to understand which sectors of the economy are contributing greatly towards the development and the contribution of each towards the national income.
• Thus, it roughly gives the idea of the structure of the economy and helps in planning and framing economic policies.

II) factor cost is the cost that is used up to make good or service.

• However, market price is the final price in the market that include the taxes.
• Thus, the difference between national income at market price and factor cost is the net indirect tax I.e. taxes less subsidies.