Why is it important to estimate National Income of a Country? What difficulties do economists encounter while carrying out such a task particularly in developing countries?

Why is it important to estimate National Income of a Country? What difficulties do economists
encounter while carrying out such a task particularly in developing countries?

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Importance of estimation of National Income of a country:
1. Planning and decision making; forecasting etc.
2. Measure of economic performance and Comparison
3. Policy formulation and implementation
4. Property ownership – determination of the size of private foreign direct investment (FDI)

Problems of measurement of National Income:
1. Incomplete/Inadequate information
2. Double counting
3. Changes in prices
4. The problem of inclusion, in terms of:
- Subsistence output (income)
- Intermediate goods
- Housing i.e. rent on owner – occupiers
- Public Services provided by the government
- Foreign payments i.e. net income from abroad
- Illegal activities eg. smuggled output
- Revaluation of assets.

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Wilfykil answered the question on February 6, 2019 at 10:50

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