Answer to Question #162138 in Macroeconomics for John Dixon

Question

Question: What is the primary use of studying national income accounting?:

Answer Choices Below [1 Correct Answer] -

A. Can be used to measure a nation's output but not its production or consumption.

B. It helps to avoid the technical problem of aggregating economic data.

C. Provides a set of numbers, rules and definitions for measuring economic activity in the aggregate economy.

D. It is a useful tool for microeconomics.

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Answer 1

Solution:

The correct answer is C. Provides a set of numbers, rules, and definitions for measuring economic activity in the aggregate economy.

National income accounting is a bookkeeping system that a national government utilizes to measure the level of the country’s economic activity in a given time period. It records the level of activities in accounts such as total revenues earned by domestic corporations, wages paid to foreign and domestic workers, and the amount spent on sales and income taxes by corporations and individuals residing in the country. It basically measures the overall health of a country’s economy.

Some of the uses of national income accounting include the following:

·        Per capita income calculation.

·        Economic planning.

·        To understand income distribution.

·        To measure the growth rate of a country.

·        To compare the living standards in different countries.

·        To estimate inflationary and deflationary pressures.