Saved Bookmarks
| 1. |
What is meant by problem of double counting? How this problem can be avoided?OR Discuss briefly, the circular flow of income in a two sector economy with the help oi a suitablediagram. (ii)To consideronly the valueadded of theoutputproduced. ORCircular Flowof income in a two Sector economy : Householdareownersof factors of production. Theyprovide factor serviceto thefrms(producingunits ). Fims providefactors payments in exchangeof theirfactor service. So, factor payments flowfrom thefirms (producing units ) to households:Households pruchase good and servicefrom the (producingunits)for whichtheymakepaymentto them. So consumptionexpenditure ( producing units) forwhichthey make paymentto them. So, consumption expenditure (speding on goods and services) flows from housedoldstothefirm |
|
Answer» Solution :The problem of double‘Counting arises when the value of certain goods and services are counted more than once while estimating National Income by Value ADDED Method. This happens when the value: intermediate goods is counted' In the estimation of National Income ALONG with the final value ofgoodservice . Two methodsto avoidthe problem of doublecounting. (i) To consideronlythe finalvalue of outputproduced. (ii) To consider only the value added of the output produced OR Circular Flow of INCOMES in a two SECTOR economy: Household are owners of factors of production. They provide factor services to the FIRMS (producing units). Firms provide factor payment in exchange of their factor services. So, factor payments flow from firms (producing units) to households. Households purchase goods and services from firms (producing units) for which they make payment to them. So, consumption expenditure (spending on goods and services) flows from households to the firms. 
|
|