Double counting gives a false picture of national income. Give reason. – InterviewSolution

InterviewSolution

1.	Double counting gives a false picture of national income. Give reason.
Answer» Double counting means counting the value of the same product (or expenditure) twice i.e. more than once. According to production method while calculating national income, the value of only final products and services should be considered. For example, for an iron manufacturer, iron is a final product and for a machine manufacturer the machine which consists of iron is a final product. In this sense, the value of iron gets double counted. This is incorrect and so double counting should be removed from national income accounting. When the value of a commodity is calculated for more than one time in national income it gives an over-valued national income and hence a false picture.

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