Explain with an example the difficulty experienced while calculating n

1.	Explain with an example the difficulty experienced while calculating national income with expenditure method.
Answer» Difficulty in calculating national income through expenditure: The official data of people’s expenditure cannot be obtained correctly and therefore it becomes difficult to calculate national income by this method. Example: Suppose a business person named Arav gives ₹ 30,000 as salary to Milap, who works as his accountant and considers ₹ 30,000 as the expenditure incurred. Now Milap gives ₹ 3000 to Khushbu who is his domestic helper. This becomes Milap’s expenditure. Now, the question that arises is ‘What is the actual expenditure? ₹ 30,000 or ₹ 30,000 + ₹ 3000 = ₹ 33,000? So, even in this method the problem of double counting arises in calculating national income.

Explain with an example the difficulty experienced while calculating national income with expenditure method.

Answer»

Difficulty in calculating national income through expenditure:

The official data of people’s expenditure cannot be obtained correctly and therefore it becomes difficult to calculate national income by this method.

Example:

Suppose a business person named Arav gives ₹ 30,000 as salary to Milap, who works as his accountant and considers ₹ 30,000 as the expenditure incurred.
Now Milap gives ₹ 3000 to Khushbu who is his domestic helper. This becomes Milap’s expenditure. Now, the question that arises is ‘What is the actual expenditure? ₹ 30,000 or ₹ 30,000 + ₹ 3000 = ₹ 33,000?
So, even in this method the problem of double counting arises in calculating national income.

Discussion

No Comment Found

Related InterviewSolutions

Identify and Explain the following concepts:Vrinda receives monthly pension of Rs.5,000/- from the State Government.
Identify and Explain the following concept:Renu paid ₹ 500 for her chest *X’ ray in $ private hospital and for the same ‘X’ ray she paid ₹ 50 in government hospital.
Identify and Explain the following concept:Anil is a graduate but he is unemployed and receives ₹ 600 from the government.
Identify and Explain the following concept:Reena studies in government medical college and pays annual fees of ₹ 80,000 per year and Meena who studies in private medical college and pays annual fees of ₹ 8,00,000.
Identify and Explain the following concept:Suresh regularly purchases sanitizer for ₹ 60, owing to the ‘Corona virus’ outbreak, it disappeared from the market and after few days it was sold at ₹ 100.
Identify and Explain the following concept:Pooja, a cook earns ₹ 8,000 per month and she also cooks food in her house.
Which of the following is not included in counting national income through production method?(A) Service of house-wife(B) Goods for self-consumption(C) Goods produced for defense(D) All of these
State with reasons, whether you agree or disagree with the following statements:Under output method, value added approach is used to avoid double counting.
Double counting gives a false picture of national income. Give reason.
How do you count value of finished goods to avoid double counting?

Explain with an example the difficulty experienced while calculating national income with expenditure method.

Discussion

No Comment Found

Related InterviewSolutions

Reply to Comment