National Income Accounting Test - 3

The stock of unsold finished goods, or semi-finished goods, or raw materials which a firm carries from one year to the next is called inventory

Inventory is a stock variable. It may have a value at the beginning of the year; it may have a higher value at the end of the year

The value added method of calculating national income is also called as product method

Product method: In this method national income is measured as money value of all final goods and services produced in an economy during a year. Final goods here refer to those goods which are directly consumed and not used in further production process.

When value added by each and every individual firm is added, we get the value of national income.

Expenditure method: national income is measured as a flow of expenditure. Includes sum total of private consumption expenditure. Government consumption expenditure, gross capital formation (Government and private) and net exports (Export-Import).

It does not include expenditure on second hand goods.

Countries especially like India faces a great deal of unequal distribution of wealth. The main reasons for this include the people leaving behind an immense properties to their inherits, private property possession is another reason, difference in natural quality can be considered as one of the reason, for example a person born in rich family receives proper education even though he has a mediocre ability and exactly opposite happens for an intelligent born in poor family.

Income method uses adding up of factor payments received during a year to calculate national income.

Income method: according to this method income is measured as flow of factors income. There are generally four factors of production labour, capital, land and entrepreneurship. Labour gets wages and salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their remuneration.

Central statistical organisation is responsible for statistical activities in India. The CSO was set up in the cabinet secretariat on 2 May 1951.

The national income estimation is the responsibility of central statistical office.

There are few difficulties associated with calculation of national income which include

• Public Services
  
• Price changes
  
• Wages and salaries paid in kind
  

Apart from these the other problems involved are

• Lack of Adequate Data
  
• Non-availability of Reliable Information
  
• Choice of Method
  
• Double Counting
  

Among the given options only first statement which states that CSO is a premier statistical institution for collecting data in India is true. The second statement is false because it estimates only once a year but not twice. 

A sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves) is called a dividend