Question

Difficulties in measuring national income?​

Answer 1

Answer:

Difficulties in measurement of the national income

Non-monetary transactions.

Petty production.

Inadequate and unreliable statistics.

Problem of double accounting.

Transfer payment.

Environment damages.

Second- hand Transaction.

Illiteracy and Ignorance.

Answer 2

Difficulties in the Measurement of National Income: There are various difficulties in the measurement of national income.

A) Theoretical Difficulties or Conceptual Difficulties :

1) Transfer payments : Individuals get pension, unemployment allowance etc. but whether these transfer payments should be included in national income or not, is a major problem. On one hand they are a part of individual income and on the other hand, they are part of Government expenditure. Hence, these transfer payments are not included in national income.

2) Illegal income : Illegal incomes like income from gambling, black marketing, theft, smuggling etc. are not included in national income.

3) Unpaid services : For the purpose of calculating national income, only paid goods and services are considered. However, there are a number of unpaid services which are not accounted for national income. For example, services of housewives and the services provided out of love, affection, mercy, sympathy, charity etc. are not included in national income. in the calculation of

4) Production for self consumption: The products kept for self consumption by the farmers and other allied producers do not enter the market. Hence, it is not accounted for in the national Income.

5) Income of foreign firms : According to IMF, income of a foreign firm, should be included in the national income of the country, where the firm actually undertakes the production work.

6) Valuation of Government Services : Government provides services such a number of public as law and order, defence, public administration, education, health etc. The calculation of these services services at market price is difficult, as the real value of these services is not known. Therefore, it Income. is difficult to calculate national

7) Changing price level : Difficulties in national income also arise due calculating to changes price levels. For example, price level rises, the national an increase even though production may have decreased. Also, in when the income may show the when the income there may be price level falls, the national may show a decrease even though an increase in production.

B) Practical Difficulties or Statistical Difficulties : In practice, in the collection estimation of a number of difficulties arise of statistical data required for national income. Some of the practical difficulties are as follows: of double counting : The greatest in calculating national income is It arises from the failure

1) Problem difficulty of double counting. to distinguish properly, between a final and an intermediate product. For example, flour used by a bakery is an intermediate product and that by a household is final product.

2) Existence of non-monetized sector In India, especially in rural areas, there exists the non-monetized sector. Agriculture, still being in the nature of subsistence farming, a major part of production is partly exchanged for other goods and services. It is excluded while counting national income.

3) Inadequate and unreliable data : Adequate and correct data on production and cost data relating to crops, fisheries, animal husbandry, forestry, construction workers, small enterprises etc., are not available in a developing country. Besides this, data on unearned incomes, consumption and investment expenditure of rural and urban population are also not available. This does not reveal the actual size of national income. 4) Depreciation : Depreciation refers to wear and tear of capital assets, due to their use in the process of production. There are no uniform, common or accepted standard rates of depreciation applicable to the various capital assets. Thus, it is difficult to make correct deductions for depreciation.

5) Capital gains or losses : Capital gains or capital losses, which accrue to the property owners by increase or decrease in the market value of their capital assets or changes in demand, are not included in the national income because these changes do not result from current economic activities.

6) Illiteracy and ignorance : Due to ignorance and illiteracy, small producers do not keep an account of their production. So they cannot give information about the quantity or value of their output. 7) Difficulties in the classification of working population : In India, working population is not clearly defined. For instance, farmers in India are not engaged in agriculture round the year. Obviously, in the off season, they engage themselves in alternative occupations. In such a case, it is very difficult to identify their incomes from a particular occupation.

8) Valuation of inventories : Raw materials, intermediate goods, semi-finished and finished products in the stock of the producers are known as inventories. Any mistake in measuring the value of inventory, will distort the value of the final production of the producer. Therefore, valuation of inventories requires careful assessment.

Hope this helps you

Please mark as brainliest