Table of Contents
- 1 What is the reason for calculation of national income at current as well as constant prices?
- 2 How national income of India is calculated?
- 3 Why should a country measure her national income?
- 4 What is meant by national income at constant prices?
- 5 How do you determine national income at current prices?
What is the reason for calculation of national income at current as well as constant prices?
ii. It does not show the true picture of economic growth of a country as any increase in nominal national income may be due to rise in price level without any change in physical output. So, in order to eliminate the effect of price changes, national income is also estimated at a constant price.
When national income of a country is calculated in terms of constant prices it is called?
ADVERTISEMENTS: National income at constant prices is called real national income whereas national income at current prices is called nominal national income.
Why are monetary values given in 2004/05 prices rather than current prices?
The idea behind estimating real income is to eliminate the effects of changes in prices of commodities over time. The current national accounts series in India uses 2004-05 as the base year for which estimates of value added are produced meticulously.
How national income of India is calculated?
Symbolically : National Income = Total Rent + Total Wages + Total Interest + Total Profit. goods and services produced in a country during a year is obtained, which is called total final product. This represents Gross Domestic Product ( GDP ).
Why estimation of national income of an economy is important?
National income estimates give us detailed data relating to a country’s production, savings, investment, capital formation and various other economic activities in a particular year. All these data give us a comprehensive picture of the economic activities of the people during that year.
Why is it important to calculate national income?
To be more precise, national income is the accumulated money value of all final goods and services produced in a country during one financial year. Computation of National Income is very vital as it indicates the overall health of our economy for that particular year.
Why should a country measure her national income?
Countries measure their national incomes for various reasons which include: (i) It gives an indication of the standard of living of the country through the measure of per capita income. (ii) It helps the country to determine the growth rate of the economy.
What is the difference between constant price and current price?
Current prices are those indicated at a given moment in time, and said to be in nominal value. Constant prices are in real value, i.e. corrected for changes in prices in relation to a base line or reference datum.
What is national income and why it is calculated?
National income is the sum total of the value of all the goods and services manufactured by the residents of the country, in a year., within its domestic boundaries or outside. Computation of National Income is very vital as it indicates the overall health of our economy for that particular year.
What is meant by national income at constant prices?
When goods and services produced in an accounting year are valued at the base year prices, it is called national income at constant prices. The new base year of India is 2004-05. The national income at constant price reflects the change in volume of output produced during the year which affects the National income at constant prices.
What is the real national income in India in 2013-14?
As seen in Table 4.1, National income of 2013-14 at Current year prices is Rs 20,000 and at base year prices is Rs 12,000 for the same level of output. The difference of Rs 8,000 is not real. It does not give a true picture of economic growth as the increase is merely due to rise in prices.
What is the base year of income in India?
Base Year is a normal year which is free from price fluctuations. Presently 2004-2005 is taken as the base year in India. If we measure India’s National Income of 2013-2014 at the prices of 2004-2005, then it is termed as ‘National Income at constant price’.
How do you determine national income at current prices?
Clearly, in determining national income at current prices, not only physical output produced during the year is important, but also the prices prevailing in that year are equally important. National income at constant prices is called real national income whereas national income at current prices is called nominal national income.