NIOS Economics (318) Notes/Answer| Chapter-13|Uses of National Income Estimates

NIOS Economics (318) Notes/Answer| Chapter-13|Uses of National Income Estimates. Important questions for NIOS Economics (318) Questions Answers brings you latest queries and solutions with accordance to the most recent pointers SOS . Students will clear all their doubts with regard to every chapter by active these necessary chapter queries and elaborate explanations that area unit provided by our specialists so as to assist you higher. These queries can facilitate students prepare well for the exams thanks to time constraint . NIOS Economics (318) Notes/Answer| Chapter-13|Uses of National Income Estimates

HS 2nd years Solutions (English Medium)

NIOS Economics (318) Notes/Answer| Chapter-13|Uses of National Income Estimates

Intext Questions

1. Choose the correct alternative:

(a) If the percentage rise in money income is less than the percentage rise in the price level: 

  1.  Real income rises.
  2. Real income falls.
  3. Real income remains the same.
  4. No relation between money and real income.

Ans. (b) Real income falls. 

(b) Real income is same as:

  1. Income at current prices.
  2. Money income received.
  3. Income at constant prices.
  4. Factor income.

Ans. (c) Income at constant prices. 

(c) If a country, during a year, national income at current prices rises by 2% and prices level rises by 3% national at constant prices:

  1. Falls
  2. Rises
  3. Remains the same
  4. No relation between national income at current and constant prices.

Ans. (a) Falls

(d) Money income rises from Rs.1,000 to Rs.2,000 and price index falls from 100 to 50. As a result real income rises by:

  1.  100%
  2. 200%
  3. 300% 
  4. 400%

Ans. (d) 400%

2. Fill in the blanks with appropriate word from the choices given in brackets:

(a) The rate of economic growth of a country is measured by the rate of growth of national income at _________ prices. (current, constant)

Ans. Constant.

(b) Production units engaged in manufacturing are a part of _________ sector.(primary, secondary)

Ans. Secondary.

(c) Percentage contribution of the primary sector to national income in India is _________ over the years. (increasing, decreasing)

Ans. Decreasing.

(d) Standard of living of the people of a country is measured by the_________expenditure. (investment, consumption)

Ans. Consumption.

(e) Private consumption expenditure on food in India during 1993-94 was about_________ of total. (one-half, one third)

Ans. One-half.

TERMINAL EXERCISE

1. Explain the differences between money income and real income.

Ans. The income of a person is considered to be money income which is of his own disposal. eg-salary, wages, interest etc.

The goods and services which a person buys from the money income is real income.

2. Explain the differences between national income at current prices and national income at constant prices. 

Ans. When goods and services produced by normal residents of a country in a given year are estimated at current prices, it is called national income at current prices. Current prices refer to the prices prevailing during the year for which estimates are made. On the other hand, when goods and services produce by normal residents of a country during a year are valued at fixed prices, i.e. prices of the base year, it is called national income at constant prices. Constant prices refer to the prices prevailing in the base year. National income at current prices is the same as money national income and national income at constant prices is the same as real national income.

National income at constant price is calculated by dividing the national income at current price by price index. National income date at constant price is more appropriate than the national income at current price

3. How is national income at constant price derived from national income at current prices?

Ans. National income at constant price can be derived from national income at current prices by dividing the national income at current price by price index.

4. Explain any four uses of national income estimates of a country. 

Ans. Some of the important uses of national income data are as follow:

(a) National income as a measure of economic growth 

Estimates of national income at constant prices indicate economic growth of a country. The rate of economic growth of a country is measured by the rate of growth of national income at constant prices.

(b) National income as an indicator of success or failure of planning

India has adopted planning as a means of economic growth. In a planned economy targets of outputs and rate of economic growth are fixed and resources are allocated accordingly.

Whether these targets are achieved or not is indicated by the rate of growth of output of industrial sectors and that of national income at constant prices. In this way national income data can help in assessing the achievements of planning. If the targets are not achieved the government can review the situation and take steps to correct the same 

(c) Useful in estimating per capita income

Per capita income is obtained by dividing national income by total population of the country. It indicates the average availability of goods and services to the people during a year. Higher the per capita income higher the availability of goods and services on an average to the people and so higher the average standard of living.

(d) Useful in measuring standard of living 

The standard of living of the people of a country is determined by what people spend on consumer goods and services like food, clothing, housing, education and other necessities, comforts and luxuries. Higher the expenditure on consumption higher is the standard of living of the people.

National income data, when estimated through the expenditure method, reveals consumption expenditure and investment expenditure. If the total consumption expenditure is divided by total population we get per capita consumption expenditure. This s per capita consumption expenditure indicates the average standard of living of the people of the country. If this is rising over the years the general standard of living of the people can also be said to be rising. However, this is to be remembered that this expenditure should be estimated at constant prices.s

NIOS Class 12th Economics (318) Notes/Question Answer

Chapter Chapters NameLink
Chapter 1Economy and Its ProcessClick Here
Chapter 2Basic Problems of an EconomyClick Here
Chapter 3Economic Development and Indian EconomyClick Here
Chapter 4Statistics: Meaning and ScopeClick Here
Chapter 5Making Statistical Data MeaningfulClick Here
Chapter 6Presentation of Statistical DataClick Here
Chapter 7Statistical MethodsClick Here
Chapter 8Index Numbers (Meanings and Its Construction)Click Here
Chapter 9Index Numbers (Problem and Uses)Click Here
Chapter 10Income FlowsClick Here
Chapter 11National Income: ConceptsClick Here
Chapter 12National Income: MeasurementClick Here
Chapter 13Uses of National Income EstimatesClick Here
Chapter 14What micro EconomicsClick Here
Chapter 15What affects demandClick Here
Chapter 16What affects supplyClick Here
Chapter 17Price determinationClick Here
Chapter 18CostClick Here
Chapter 19RevenueClick Here
Chapter 20Profit maximizationClick Here
Chapter 21Government budgetingClick Here
Chapter 22Money supply and its regulationClick Here
Chapter 23Need for planning in IndiaClick Here
Chapter 24Achievements of planning in IndiaClick Here
Chapter 25Recent economic reforms and the role of planningClick Here

Optical Module – I

Chapter 26AgricultureClick Here
Chapter 27IndustryClick Here
Chapter 28Independence of Agriculture and IndustryClick Here
Chapter 29Transport and CommunicationClick Here
Chapter 30EnergyClick Here
Chapter 31Financial InstitutionsClick Here
Chapter 32Social Infrastructure (Housing, Health and Education)Click Here

Optical Module – II

Chapter 33Direction and composition of India’s Foreign tradeClick Here
Chapter 34Foreign exchange rateClick Here
Chapter 35Balance of trade and balance of paymentsClick Here
Chapter 36Inflow of capital (Foreign Capital and Foreign Aid)Click Here
Chapter 37New trade policy and its implicationsClick Here
Chapter 38Population and economic developmentClick Here
Chapter 39Population of IndiaClick Here

5. Explain the role of national income data on assessing the performance of the different industrial sectors of an economy.

Ans. Production units of a country are broadly classified into primary, secondary, and tertiary sectors. Primary sector includes production units engaged in exploiting natural resources like agriculture, fishing, mining etc. The secondary sector is engaged in manufacturing goods. The tertiary sector produces services like that of transport, banking, insurance, government etc. These sectors generate factor incomes. The data on factor incomes generated by these sectors can be used to measure their relative contributions to national income. For example, the relative contribution of the three sectors in India is given helow in table:

Sectors1989-511994-95
Primary Sector57%31%
Secondary Sector15%28%
Tertiary Sector28%15%
All sector100%100%
Percentage Contribution of Sectors to GDP fc (at 1980-81 prices) in India.

On the basis of the estimates for the year 1994-95 we can say that the tertiary sector contributes the most to national income. The primary sector gets the second place and the secondary sector gets the third. If we compare the contribution of these sectors for the year 1994-95 with the year 1950-51, we can also find the change in the relative contribution of different sectors over the last 45 years. On the basis of the data in the table we can say that over the 45 year period the relative contribution of the primary sector has declined and that of secondary and tertiary sectors increased. It means that the relative significance of agriculture in the Indian economy is declining and that of manufacturing and services sectors increasing. It is a significant structural change in India because movement from agriculture to manufacturing and services is a sign of economic development of a country. In this way national income data can be used to find out about the structural changes that had taken place in the economy during a particular period.

6. Explain how the national income data collected through the income distribution method can be used to draw useful conclusions about an economy.

Ans. All individuals do not have the same income. Some earn more than the others. In other words some are rich and some are poor. It means national income is unequally distributed among people. Some degree of inequality in the distribution of income is bound to exist because individuals differ in age, sex qualifications, experience of job, physical strength, willingness to take up risky jobs and so on. But when the degree of inequality is very high and not explained by the natural factors it becomes undesirable.

The extent of inequality in a country can be measured from the national income data collected through the income distribution method. For example, from the data we can know the relative share of the working class (i.e. wages etc.) and that of property class (i.e. rent, interest, etc.). If the government finds that the level of inequality is high it can take corrective measures to reduce the same. The data about the distribution of income can also be used to assess the effectiveness of the measures taken by the government in this regard.

7. Explain how the national income data can be useful in drawing conclusions about the standard of living and level of investment in a country.

Ans. The standard of living of the people of a country is determined by what people spend on consumer goods and services like on food, clothing, housing, education and other necessities, comforts and luxuries. Higher the expenditure on consumption higher is the standard of living of the people.

National income data, when estimated through the expenditure method, reveals consumption expenditure and investment expenditure. If the total consumption expenditure is divided by total population we get per capita consumption expenditure. This per capita consumption expenditure indicates the average standard of living of the people of the country. If this is rising over the years the general standard of living of the people can also be said to be rising. However, this is to be remembered that this expenditure should be estimated at constant prices.

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