Total/National income is important but it has limitations while using it. Explain.
Answers
Answer:
Explanation:
Concept of National Income
National income means the value of goods and services produced by a country during a financial year. Thus, it is the net result of all economic activities of any country during a period of one year and is valued in terms of money. National income is an uncertain term and is often used interchangeably with the national dividend, national output, and national expenditure. We can understand this concept by understanding the national income definition
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According to Marshall: “The labor and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. This is the true net annual income or revenue of the country or national dividend.”
The definition as laid down by Marshall is being criticized on the following grounds.
Due to the varied category of goods and services, a correct estimation is very difficult.
There is a chance of double counting, hence National Income cannot be estimated correctly.