Question

Drawbacks of national income

Answer 1

Answer:

1. First, national in curve figures are not accurate. This is inevitable because measuring the economic activity of an entire country can never be done precisely. People sometimes fail to fill in forms or they complete them inaccurately.

2. The ‘black economy’ distorts the figures. This is the name given to work that is not reported to the authorities.

3. A rise in national income may not mean a rise in living standards. This is because the rise may occur as a result of increased spending on items such as defence, which do not impro­ving living standards. Similarly, an increase in national income may be accompanied by a rise in undesirable externalities, such as pollu­tion, or a fall in the quality of goods.

4. The accounts only measure paid activities. They, therefore, exclude do-it-yourself activities and the work of housewives. If over a period of years there is a rise in such activities, then this will not be shown in the official figures and comparisons over several years will be inaccurate.

In most countries of Africa and Asia, women collect water and wood, people build their own houses and live off food that they have grown. If these unpaid activities are not counted, then the figures will greatly underestimate the level of GNP in these countries.

5. National income often rises in time of war, or the threat of war, because money is spent on weapons. This will push up GNP, but the people may be acutely short of goods to buy.

Explanation:

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Answer 2

Answer:

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