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Question
What is the solution to the problem of double counting in the estimation of national income?
Solution
- The value obtained is actually the GNP at market prices. Care must be taken to avoid double counting.
- The value of the final product is derived by the summation of all the values added in the productive process.
- To avoid double counting, either the value of the final output should be taken into the estimate of GNP or the sum of values added should be taken.
- Double counting is to be avoided under value added method.
- Any commodity which is either raw material or intermediate good for the final production should not be included.
- For example, value of cotton enters value of yam as cost, and value of yam in cloth and
that of cloth in garments. - At every stage value added only should be calculated.
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| (Rs Arab) | ||
| 1 | Net current transfers to abroad | 5 |
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| 9 | Opening stock | 25 |
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