Project Part 2
Exercise 1: Chapter 15, Question 14 (textbook page 424)
National income and output are used in economic studies to estimate the value of goods and services produced in an economy—a snapshot of a country’s economic activity. A system of national accounts is employed to account for and record economic changes. National income is calculated using a variety of different methods. Some of the more popular methods include GDP (Gross Domestic Product), GNP (Gross National Product), NNP (Net National Product), NNI (Net National Income) PI (Personal Income) and PDI (Personal Disposable Income), among many others. [(Investopedia ULC 2010)]
National income statistics provide us with a numerical comparison of one country’s economic situation with another country’s economic situation. Easily economic growth of countries can be compared over time or at a particular snapshot in time. National income accounts also provide government agencies and private businesses with a tool for economic planning and budgeting. What’s more is this information provides a comparison with the standard of living from one country to another. Many issues arise with accounting for the true national income of any country. Certainly there is a concern for double-counting, for example the outputs of one business are the inputs of another business. If both are accounted for separately and added to the final numbers, the final numbers may be exacerbated by the inaccuracies of merging the accounts. Undoubtedly there are controls in place to avoid such inaccuracies. Using these statistics as an indicated of standard of living can be erroneous as the result of multiple inaccuracies or conclusions drawing from the data. Some of the reasons for the inaccurate findings can include: [(Ott 2010)] * Unrecorded items missing from the calculations when measuring national output, examples: * Non-marketed items (ex: services from person to person, babysitting) *...