Question

How is the government sector treated in the national income accounting? What are the issues involved in it?

Answer 1

Exclusion of Real Transactions:

In measuring national income from the output side only those items which are purchased and sold through the market are included.

However, all direct sales of various goods and services are excluded.

The following points will highlight the six major Problems in Measuring or calculating National Income. The Problems are: 1. Exclusion of Real Transactions 2. The Value of Leisure 3. Cost of Environmental Damage 4. The Underground Economy 5. Transfer Payments and Capital Gains 6. Valuation of Inventories 7. Self-Consumption 8. Lack of Official Records 9. Imputed Income 10. Valuation of Government Service.