Topics: Economics, Quality of life, Nation Pages: 6 (1651 words) Published: May 18, 2013
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....
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