Question

Discuss and explain any four uses of national income statistics

Answer 1

Four uses of national income statistics are as follows -

Useful in measuring inequalities in the distribution of income - All individuals so nothave the same income. It means national income is unequally distributed among people.The extent of inequality in a country can be measured from the national income datacollected through the income distribution methods. The wealth of a country may belong to only a small number of very rich people and so a high national income can conceal widespread poverty. Living standards within a society depend partly on how wealth and income are shared among the people.

Useful in assessing the performance of different production sectors - Production unitsof a country are broadly classified into primary, secondary and tertiary sectors. Thesesectors generate factor incomes. The data on factor incomes generated by these sectorscan be used to measure their relative contributions to national income.

Useful in assessing different National Currencies - In order to compare the national income of different countries, it is necessary to covert the figures into the same currency. For instance, the United States’s figures are in dollars whereas Britain’s figures are in pounds sterling. To compare them, we must either change the former into pounds of the latter into dollars. This is done by using the exchange rate at which pounds can be changed into dollars.

Useful in measuring standards of income - The expenditure method revealsconsumption expenditure and investment expenditure. If the total consumptionexpenditure is divided by the total investment expenditure we get per capita consumptionexpenditure which indicates the average standard of living of the people of the country