Scribd Logo
Upload

Welcome to Scribd!

  • 163 views

    Define National Income Eco415

    Uploaded by

    aishah
    This document discusses measuring national income and implementing fiscal policy. It defines national income as the total income received by residents of a country in one year. It then discusses four problems in measuring national income statistics: 1) non-monetized sectors in developing countries, 2) lack of expertise, 3) less sophisticated machinery, and 4) potential for double counting. The document also defines fiscal policy as using government taxation and expenditure to influence spending, employment and prices. It explains that contractionary fiscal policy with tax increases and spending cuts can reduce inflation, while expansionary policy with tax cuts and more government spending can reduce unemployment.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Define National Income Eco415

    Uploaded by

    aishah
    163 views3 pages
    This document discusses measuring national income and implementing fiscal policy. It defines national income as the total income received by residents of a country in one year. It then discusses four problems in measuring national income statistics: 1) non-monetized sectors in developing countries, 2) lack of expertise, 3) less sophisticated machinery, and 4) potential for double counting. The document also defines fiscal policy as using government taxation and expenditure to influence spending, employment and prices. It explains that contractionary fiscal policy with tax increases and spending cuts can reduce inflation, while expansionary policy with tax cuts and more government spending can reduce unemployment.

    Original Description:

    national income

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document discusses measuring national income and implementing fiscal policy. It defines national income as the total income received by residents of a country in one year. It then discusses four problems in measuring national income statistics: 1) non-monetized sectors in developing countries, 2) lack of expertise, 3) less sophisticated machinery, and 4) potential for double counting. The document also defines fiscal policy as using government taxation and expenditure to influence spending, employment and prices. It explains that contractionary fiscal policy with tax increases and spending cuts can reduce inflation, while expansionary policy with tax cuts and more government spending can reduce unemployment.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    163 views3 pages

    Define National Income Eco415

    Uploaded by

    aishah
    This document discusses measuring national income and implementing fiscal policy. It defines national income as the total income received by residents of a country in one year. It then discusses four problems in measuring national income statistics: 1) non-monetized sectors in developing countries, 2) lack of expertise, 3) less sophisticated machinery, and 4) potential for double counting. The document also defines fiscal policy as using government taxation and expenditure to influence spending, employment and prices. It explains that contractionary fiscal policy with tax increases and spending cuts can reduce inflation, while expansionary policy with tax cuts and more government spending can reduce unemployment.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Assignment ECO415

    Past Year January 2012


    Part B
    Question 3
    a) Define national income. Discuss four (4) problems in measuring national income
    statistics.
    National income is the total income received by the residents of a country for a period of one
    year.
    The first problems in measuring national income is that the problems of non-monetized
    sector. This usually arise in most third world countries like India, Bangladesh, Myanmar,
    Cambodia and many African countries. The existence of a large number of non-monetized
    activities in these countries where it come especially from agriculture sector will make the
    computation of the national income more difficult. This is due to the fact that a large quantity of
    agricultural output in these countries does not reach the market. It is either consumed directly by
    the farmers or exchanged for other goods and services.
    The other problem to measure national income is the problem of expertise. In third world
    countries the major problem is the lack of professionals such as statisticians, researchers,
    programmers and analysts. They need the services of these professionals is very important in
    estimating national income data accurately with minimum errors.
    There is also a problem of less sophisticated machinery. The third world countries still use
    obsolete machinery.

    Another important difficulty is the non-availability of sophisticated

    machinery such as advanced computers or programs to compute national income data. Data
    collected on national income regardless of which method is used, need to be analyzed using
    sophisticated machinery.

    The fourth problem to measure national income statistics could be the problem of double
    counting. It is usually associated with the product method. Double counting happen when the
    value of final product and the value of the intermediate products and the value of raw materials
    are taken into consideration. To avoid this, take only the value of the final product or use the
    value added method.

    b) Define fiscal policy and explain how it can be implemented to reduce the problem of
    inflation and unemployment.
    Fiscal policy refers to the use of government taxation and expenditure to influence the
    countrys spending, employment and price levels. This can be classified into two policies which
    are expansionary Fiscal policy and contractionary Fiscal policy.
    The Contractionary Fiscal Policy is implemented to overcome the problems of inflation.
    During inflation, the appropriate fiscal policy is to create a budget surplus in order to reduce
    aggregate spending. The instruments used in contractionary fiscal policies are the increasing of
    taxes and the reduction of government expenditure.
    The Expansionary Fiscal Policy is implemented to overcome the problems of unemployment.
    It is also to stimulate the economy growth. In recession, the economy suffers from rising
    unemployment, falling income and shrinking economic activity. In order to reduce this problem,
    the government will increase public spending also known as government expenditure by
    undertaking public works programs and taxes will be reduced. The effect of tax cuts would
    increase the amount of disposable income of individuals and business firms.

    You might also like