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Outline the main uses of National Income Statistics - Leaving Cert Economics - Question e - 2010
Question e
Outline the main uses of National Income Statistics. State and explain four reasons why care should be taken when using National Income Statistics as a measure of e... show full transcript
Worked Solution & Example Answer:Outline the main uses of National Income Statistics - Leaving Cert Economics - Question e - 2010
Step 1
Outline the main uses of National Income Statistics.
Answer
National Income Statistics serve several key purposes:
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Indication of alterations in our standard of living: Any change in national income reveals the level of economic growth or, conversely, indicate declines in the standard of living over time.
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Means of comparing the standard of living in different countries: These statistics allow for comparisons of living standards across nations, which can highlight disparities and inform policy decisions.
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Assists the government in formulating economic policy: National Income Statistics provide valuable information that helps shape government policies aimed at economic development, planning, and allocation of resources.
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Evaluate economic policy: They are used to assess the effectiveness of economic policies by monitoring changes and providing a benchmark against which progress can be measured.
Step 2
State and explain four reasons why care should be taken when using National Income Statistics as a measure of economic performance of a country.
Answer
The following reasons illustrate the need for caution:
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Population changes: If national income grows at a slower rate than population growth, per capita income may fall, hiding declines in the standard of living.
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Inflation/deflation: Changes in national income must be adjusted for inflation or deflation since nominal income rises may not reflect true improvements in living standards.
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Employment/Unemployment: A high national income could mask a high unemployment rate. Individuals without jobs may not experience the benefits of economic growth, leading to misleading interpretations of overall economic well-being.
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Exclusion of important activities: Some valuable contributions, such as informal economy activities or household work, are often excluded from official national income calculations, leading to underestimation of the true economic activity and welfare within the country.