2.11 - Economic Growth - Accuracy of national statistics

Question 1

Reasons why national statistics are inaccurate

Answer 1

. Hidden economy
. Home produced services
. Public sector

Question 2

Explain hidden economy

Answer 2

. People work in the informal economy to avoid taxes and government regulations (e.g. health and safety). Self-employed workers (e.g. builders) undeclare or do not declare their income.

.They are paid in cash and cheques are cards are easy to be traced.

Question 3

Examples of tax

Answer 3

VAT, income tax, national insurance

Question 4

Explain home produced services

Answer 4

. A large parts of the production of the agricultural sector is not traded and therefore does not appear in national statistics.

.This is due to subsistence agriculture, consuming what they produce. The output of housewives is equally not recorded. This means in reality output should be higher

Question 5

Define public sector

Answer 5

.Valuing the output of the public sector is difficult as its not bought or sold.

Its circumvented by valuing non - marketed output as a cost of production.

.For example value of output of a school is the cost of running the school.