Term Papers on National Income Statistics

Term Paper Title	National Income Statistics
# of Words	961
# of Pages (250 words per page double spaced)	3.84

National Income Statistics

Development Economics:  Evaluate the validity of using National Income statistics as an indicator of standard of living and as a comparison of economic development between different countries.

National Income is an indicator of standard of living measured by output, expenditure or income in one year.

The reason that these three factors are the chosen methods of calculation is that  they can all be calculated fairly easily Ð as long as the data is recorded.  The average income in a country determines whether or not people can afford to live a comfortable life.  The expenditure in an economy shows what people are spending their money on, and the output shows what is being produced for a nation to buy.  In theory the totals of each of these should be equal as a country should produce enough for itself to buy with itÕs given income (we must also consider imports and exports).  From this perspective National Income statistics should therefore give at least an idea of the standard of living in a country.  This is why this statistic is widely used in the USA and Japan.

However, there are some criticisms  of National Income statistics.  The first major criticism is that of accuracy due to difficulties in the measurement. E.g. Second hand deals go unregistered.  The second criticism which is linked to this is that sales in the black economy will also go unregistered even though they may have significant effects (both good and bad) on a personÕs standard of living.  For example, if drugs were being sold on the black market this may lead to a rise in crime and so peopleÕs standard of living would fall, however the person selling the drugs would increase their income and so that may increase their standard of living.

National Income will rise if employment and output rise, but a rise in these factors does not necessarily reflect a rise in the standard of living.  For example an oil spill in the ocean will require a large team of rescue workers to clean up, employment has risen in this situation but the area suffers terrible effects in terms of the damage to the environment and natural beauty and perhaps a reduction in the tourist flow into the area.

A further criticism is that National Income statistics do not measure the quality of life.  For example, only employment is measured, not job satisfaction.  The amount of leisure time a person has is not measured either.

National income is only measured in money terms in that year.  In order to allow it to be compared to other years, inflation should be taken into account, and figures should be given in real terms.  The distribution of income is not measured by these statistics either.

We must remember that in measuring National Income we are only taking GDP (spending power) into account.  Realistically there are many more...

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