definition of national income,importances,problems encountered when measuring national income?

Answer 1

National income is the sum total of Interest income+rental income of persons+ personal rental income. This is equal to National Product. In fact National Income=National Product or GNP.
It is defined as the amount of goods and services produced in an Economy.
National Income-Personal rental income+/-statistical descripancy gives the net national income. Net National income is also called Capital Formation in an economy.
So statistical discripncy is a problem. It is overcome by subtracting Capital employed from Capital formed.

Answer 2

National income is the aggregate money value of all goods and services produced in a country during one year. (account being taken of the deductuions being taken due to wear and tear, and depreciation of plants and machinery used in the production of goods of goods and services).

Difficulties/Problems in the Measurement of National Income:

(i) Non-availability of statistical material: Some persons like electricians, plumbers, etc., do some job in their spare time and receive income. The state finds it very difficult to know the exact amount received from such services. This income which, should have been added to the national income is not recorded due to {be lack of full information of statistics material.



(ii) The danger of double counting: While computing the national income, there is always the danger of double or multiple counting. If care is not taken in estimating the income, the cost of the commodity is likely to be counted twice or thrice and national income will be overestimated.

(iii) Non-marketed services: In estimating the national income, only those services are included for which the payment is made. The unpaid services, or non-marketed services are excluded from the national income.

(iv) Difficulty in assessing the depreciation allowance: The deduction of depreciation allowances, accidental damages, repair, and replacement charges from the national income is not an easy task. It' requires high degree of judgment to assess the depreciation allowance and other charges.

(v) Housing: A person lives in a rented house. He pays $5000 per month to the landlord. The income of the landlord is recorded in the national income. Let us suppose that the tenant purchases the same house from the landlord. Now the income of the owner occupant has increased by $5000. Is it not justifiable to include this income in the national income? Should or should not this income be recorded in the national income is still a controversial question.

(vi) Transfer earnings: While measuring the national income, it should be seen that transfer payments should not become a part of national income. The payments made as relief allowance, pensions, etc. do not contribute towards current production. So they should be excluded from national income.

(vii) Self-consumed production: In developing countries, a significant part of the output is not exchanged for money in the market. It is either consumed directly by producers or bartered for other goods This unorganized and non-monetized sector makes calculation of national income difficult.

(viii) Price level changes: National income is measured in money terms. The measuring rod of-money itself does not remain stable. This means that national income can change without any change in output.

Answer 3

The income tax has the effect that the wealthy pay much more of the total tax bill than middle class citizens do: the top 10% of earners pay 70% of the taxes. (Before the Bush tax cuts, it was 60%.) A sales tax would flatten this out: the middle class would pay more, and the wealthy would pay much less. Draw your own conclusion as to whether this would be desireable.