2.National income accounting (Part 2) Flashcards
What is a base year?
A base year is the year used to calculate the real Gross Domestic Product (GDP).
What are the characteristics of a good base year?
A good base year should be nearby (not very old) and should be a normal/stable year (no major ups and downs, no new reforms, no war or economic crisis).
Why is a revision in the base year essential?
A revision in the base year is essential for better policy-making. It helps track structural changes in an economy and improve or update macroeconomic indicators that reflect the economic performance of a country.
What is the System of National Accounts (SNA) 2008?
The System of National Accounts (SNA) 2008 is a standard developed by the United Nations to maintain a similar pattern while calculating statistics of different countries for better comparison.
What is the Special Data Dissemination Standard (SDDS)?
The Special Data Dissemination Standard (SDDS) is a standard developed by the International Monetary Fund (IMF) to promote transparency and encourage member countries to provide their economic and financial data to the public.
How often did India used to change the base year before subscribing to the SNA 2008 and the SDDS?
India used to change the base year every ten years from 1949 till 1980-81.
Why did India break the practice of changing the base year every five years in 2009-10?
India broke the practice of changing the base year every five years in 2009-10 because that year was not considered a normal year as it succeeded in the global slowdown of 2008.
What is the formula for Net Domestic Product at Market Prices (NDP)?
Net Domestic Product at Market Prices (NDP) = Gross Domestic Product (GDP) - Depreciation.
What is depreciation?
Depreciation is a part of the capital that gets consumed during the year due to wear and tear. It does not become part of anybody’s income.
What is Gross Domestic Product (GDP)?
Gross Domestic Product (GDP) is the total market value of all the finished goods and services produced within a country’s borders in a specific time period.
What are the three methods to calculate GDP?
The three methods to calculate GDP are Income Method, Expenditure Method, and Production Method.
What is the Expenditure Method of calculating GDP?
The Expenditure Method of calculating GDP takes into consideration the total national expenditure incurred in a particular year. The formula to calculate GDP using the Expenditure Method is GDP= C+I+G+(X-M).
What is the Production Method of calculating GDP?
The Production Method of calculating GDP, also known as the Output Method or Value added method, computes Gross Value Added (GVA) or GDP by taking the difference between the value of output and intermediate consumption of all three sectors, i.e. Primary sector, Secondary sector, and Tertiary sector.
What is the problem of double counting in GDP calculation?
The problem of double counting in GDP calculation occurs when output is counted more than once as it travels through the stages of production. This can lead to an overestimation of the size of the economy.
How is the problem of double counting solved in GDP calculation?
The problem of double counting in GDP calculation is solved by counting only the value of final goods and services in the chain of production that is sold for consumption, investment, government, and trade purposes. Intermediate goods, which are goods that go into the production of other goods, are excluded from GDP calculation.
