Discuss whether or not changes in National Income provide a suitable measure of economic growth a
Introduction Economic growth means how well an economy is doing, it contains two parts—the potential growth and the actual growth. ... National income mean the level of total output, it has some measured—national expenditure, national output and national income. The key measure of national income is GDP. ... Countries use GDP to calculate the national income and then measured the economic growth. ... However, GDP and national income only measured the actual growth not potential growth, although GDP was the best way of measured national income. There are also other factors such as Gross value added (GVA), Gross national income (GNP) and Net national income at market prices. Therefore, there are some factors leads to the inaccuracy national income, which use it to measure the economic growth. Part a There are some problems when use national income to measured economic growth in over a period of time. ... If price tend to increase, there might be increased in the national income and may lead to the economic growth. But that not mean the change in price necessary measured change in economy growth. There are some inaccuracies about national income such as inflation rate. ... Comparing the two figures, we can see easily the national income increased by ?00, but the real total output does not changed. So, the national income may be increased and the economy does not changed. The second is the quality of goods and services measured the national income inaccuracy. ... Form the figures, as time goes by, a computer’s price decreased and the national income of the computer was fall. Actually, the total output stays the same (1), so the economic not decreased but remain the same. So the quality of goods and services also can measure not correct national income. Thirdly, tax is the other main reason lead to the incorrect national income. ... So national income contains tax, and the real output for a production must minus its tax.