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Explain the measurements of national income, & their difficulties?
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Explain the measurements of national income, & their difficulties?
Measurement of National Income
There are three ways of measuring the National Income of a country. They are from the income side, the output side and the expenditure side. Thus, we can classify these perspectives into the following methods of measurement of National Income.

Methods of Measuring National Income
1. Product Method
Under this method, we add the values of output produced or services rendered by the different sectors of the economy during the year in order to calculate the National Income. In this method, we include only the value added by each firm in the production process in the output figure.

2. Income Method 
Under this method, we add all the incomes from employment and ownership of assets before taxation received from all the production activities in an economy.

3. Expenditure Method
This method measures the total domestic expenditure of the economy. It consists of two elements, viz. Consumption expenditure and Investment expenditure. Consumption expenditure includes consumption expenditure of the household sector on goods and services and consumption outlays of the business sector and public authorities.

Difficulties in Measurement of National Income:

a. Conceptual difficulties
b. Statistical difficulties

A. Conceptual difficulties
It is difficult to calculate the value of some of the items such as services rendered for free and goods that are to be sold but are used for self-consumption.
Sometimes, it becomes difficult to make a clear distinction between primary, intermediate and final goods.
What price to choose to determine the monetary value of National Product is always a difficult question?
Whether to include the income of the foreign companies in the National Income or not because they emit a major part of their income outside India?
B. Statistical difficulties
In case of changes in the price level, we need to use the Index numbers which have their own inherent limitations.
Statistical figures are not always accurate as they are based on the sample surveys. Also, all the data are not often available.
All the countries have different methods of estimating National Income. Thus, it is not easily comparable.
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Explain the measurements of national income, & their difficulties?
National income is a measure of the total value of goods and services produced by a country over a specific period of time, usually one year. It is used to assess the economic performance and standard of living of a nation. There are several measurements of national income, including:

1. Gross Domestic Product (GDP): GDP is the most commonly used measure of national income. It represents the total value of all final goods and services produced within a country's borders in a given year. GDP can be calculated using either the expenditure approach (summing up consumption, investment, government spending, and net exports) or the income approach (summing up wages, profits, rents, and other forms of income). GDP can be measured at current prices or adjusted for inflation to provide real GDP.

2. Gross National Product (GNP): GNP measures the total value of all final goods and services produced by a country's residents (both domestically and abroad) in a given year. It includes the income earned by citizens and businesses from their investments and activities outside the country. GNP is calculated by adding net income from abroad (the difference between income earned by domestic residents abroad and income earned by foreign residents within the country) to GDP.

3. Net National Product (NNP): NNP is obtained by subtracting depreciation (the wear and tear of capital assets) from GNP. It provides a measure of the net value of the country's output after accounting for the capital consumed in the production process.

4. National Disposable Income (NDI): NDI is the amount of income available for consumption and saving by the residents of a country after deducting taxes and adding government transfers. It represents the actual income that individuals and households have at their disposal.

5. Per Capita Income: Per capita income is obtained by dividing the total national income by the population of a country. It provides an average measure of income per person and is often used to compare the standard of living across countries.

These measurements of national income provide valuable insights into the economic performance, growth, and distribution of wealth within a country. They are used by policymakers, economists, and researchers to analyze and make decisions regarding economic policies, investments, and development strategies.
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Explain the measurements of national income, & their difficulties?
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