I need to explain the uses, problem and critically examine the uses or problems with real life examples. Question 1 Briefly explain the uses of National Income Statistics. Comparison over Time According to Vengedasalam D. and Madhavan K. (2010), national income able to state the economy’s performance whether is progressing, stagnating or deteriorating on yearly basis from national income figures. For example like Singapore, their national income has improved steadily over the years which indicate that the country have a stable economy and high in productivity.
As for economies in countries such as India, China, and Bangladesh are stagnating and should take action to increase their growth and development. However countries such as Vietnam, Cambodia, and some African countries have deteriorated in terms of economic performance. Comparisons between Countries Ali H. (1999) stated that we can differentiate the development and developing countries through national income. According to an international organization, OECD (Organization Economic Cooperation and Development) statistic, Singapore was the 13th richest country in the world.
OECD is to tackle the country performance to estimate the country is developed or still developing. Countries such as Ethiopia, Myanmar, Bangladesh and most of the Asian states are the poorer nations. Measurement the Standard of Living According to Vengedasalam D. and Madhavan K. (2010), nationwide earnings information able to help us evaluate the quality lifestyle of individuals in different nations and the individuals residing in the same nations at different times. There is a correlation between national income and standard of living because when income is high, standards of living is high; when income is low, standards of living is low.
For example countries such as United States, United Kingdom, Canada, and Australia have high national income and also high standards of living. However, as for the countries such as Ethiopia and Myanmar have low national income leads to low standards of living. Balance of Payment Ali H. (1999) stated that stability of transaction can be determine as the complete of expenses and invoices that a nation generates as result of transfer and trade worldwide with other nations. We can approximately calculate whether the nation will face lack or excess balance of transaction through the nationwide earnings data.
There will be an output of forex from the nation and this will lead to disequilibrium in the complete amount of transaction if earnings paid overseas are far greater than earnings obtained overseas. National Planning According to Vengedasalam D. and Madhavan K. (2010), national planning also knows as planning of each of the countries which based on the national income statistic, the government will formulate its short term and long term economic planning. In this case, Karl E. Case and Ray C. Fair (2003) stated on the basis of present economic performance, the government will have to forecast future developments.
This which if income increase, plans for the future will increase; same goes to if income decrease, plans for the future will decrease. This also important and why all the countries have to collate data on national income. Question 2 Discuss the problems involved in calculating the GNP per capita of an economy. Underground Economy O’Sullivan A. , Sheffrin S. M. , and Perez S. J. (2012) stated that one of the significant problems from measured GDP is so-called underground economy where transactions are not reported to official authorities.
According to Lipsey (1998), some transactions are perfectly legal, but for the people do not report their income that they have generated it is because they wanted to avoid paying taxes. For example plumber who repairs pipes leakages in the toilet and only receive payment by cash which is to avoid taxes and these transactions are not recorded so they are excluded from GDP. According to Tucker I. B. (2008), some transaction such as illegal gambling, illegal drugs, illegal guns prostitution, and loan-shark are goods and services that meets every requirement for GDP but GDP does not include unreported criminals activities.
Nonmarket Activities According to Lipsey (1998), dealings that do not take position in the structured industry are also being disregards by GDP. For illustrations like solutions that individuals do for themselves in their own houses because these solutions are not moved through markets; this is so GDP statisticians cannot evaluate them. Tucker I. B. (2008) stated nonmarket activities that are not transferred though the markets such as homemaker production, do-it-yourself activities, childcare services, and voluntary work. Problem of Illiteracy Vengedasalam D. and Madhavan K. 2010) stated that problem of illiteracy most happen in third world countries like Bangladesh, Indonesia, Myanmar, India, and many African nations which the people there do not know how to keep accounts of their productive activities. With this problem of illiteracy, the governments of these countries will have difficulties in getting information such as estimated value of home produced product.
For example people there do not have knowledge on marketing and finance which makes them do not know the value of product they are selling. Problems of Expertise According to Vengedasalam D. nd Madhavan K. (2010), one of the major problems of developing countries is shortage of professionals. In order to measure the national income accurately, we need the professional services such as statisticians, analysts, programmers, researchers. With these professionals in the developing countries will be able to present the national income data accurately with less technical and human errors. For example if the country do not have programmer, they need to record the national income data in papers and there will be more human errors. Lack of Sophisticated Machinery
Vengedasalam D. and Madhavan K. (2010) stated that technical aspect is as important as human factor. Technical aspect such as having sophisticated machinery is needed to compute data and information. For example, problems that developing countries like Indonesia and Peru are facing the problem of technical experts and technical equipment. There countries need this latest and advance machinery to compute massive volume of data. In the end, data that collected on national income need to be analyzed using sophisticated machinery regardless of which method is used. Question 3
Explain with examples whether you support its use as a measure of quality of life in a country. No, I do not support its uses as an evaluation of total well-being in a nation. The factors as follows: Problem of Illiteracy Third world countries like Bangladesh, Indonesia, Myanmar, India, and many African nation facing this problems in which the people there do not know how to keep accounts of their productive activities. For example, Memon G. R. (2007) stated Pakistan has one of the smallest expenses of details on the globe, and the smallest among nations of relative resources and public or financial conditions.
With a per close relatives earnings of over $450 Pakistan has an older details amount of 49%, while both Vietnam and Local Indian native with less per close relatives earnings have details expenses of 94% and 52%, respectively (Human Development Middle, 1998). Knowledge is greater in places and in the areas of Sindh and Punjab, among the greater earnings group, and in men. Nonmarket Activities According to Shaheen S. , Sial M. H. , Awan M. S. (2011), woman’s option about contribution in work market is of crucial importance in determining living standard, dependency stress and saving design in homes.
Women signify about half of the people in this country in Pakistan. But in Pakistan mostly female’s execute happens in non-market activities in the home or the informal market. In recent past women contribution in modern market activities has been increasing. Factors determining the profession of women are extremely complex. At the individual level female’s option to execute is topic to such factors as the availability to projects, knowledge level and skills. Underground Economy
One of the problems from measured GDP is so-called underground economy where transactions are not reported to official authorities. According to Schneider F. and Enste D. H. (2000), the results from eight nations in African-american are revealed, among these, Nigeria and The red sea have the biggest subterranean financial systems with 76 % and 68 % of GDP; Mauritius has the tiniest subterranean economic system with 20 %. Implementing the forex requirement strategy, Tanzania had a subterranean economic system of 31 % (of GDP) in 1989–90, and Southern African-american, 9 % in 1989 to 1990.
The position of the size the subterranean financial systems for the Africa nations is reinforced by identical results and historical proof from Pozo (1996); Lawrence Chickering and Muhamed Salahdine (1991); and Lubell (1991). Conclusion I have explained the uses and problems. I have also examined the problems with real life examples.