what are the precautions to be taken while calculating national income through product method
Answers
Hey Mate !
Precautions of Product Method:
1. Avoid double counting.
2. Production for self consumption should be included.
3. Sale of second hand goods is not to be included.
4. Production from illegal activities is not to be included.
5. Value of services rendered by housewives/family members is not to be included.
Explanation:
Precautions:
(i) Include the value of final product only.
(ii) Sale of second hand goods is not included as these are already accounted for during the year they were produced.
(iii) Include value of own account production in total output.
(iv) Imputed value of owner occupied house should be included.
(v) Value of intermediate goods is not included in the estimation of value added as, the value of intermediate goods is reflected in the value of final goods.
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Answer:
1. Expenditure on only final goods and services should be included in the national income estimation while intermediate consumption expenditure should not be included.
2. Similarly, expenditure on the purchase of second hand goods should not be included in the national income estimation of the current accounting year.
Explanation:
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