Explain why changes in national Income of a country do not necessarily imply change in economic and social welfare of its citizen.
- Type of goods produced. National income increases when a country produces capital goods, which do not necessarily improve welfare in the short run
- When people work hard and forego leisure national income increases at the expense of quality of life
- National income figures can be low due to omissions in measuring GNP for example due to large fraction of subsistence sector non-monetary output.
- National income of a country can be low when illegal activities carried out by its citizen such as gambling, drug dealing and smuggling are not included in national figures and ye contribute significantly to people’s welfare.
- Income distribution: a country can have high national income figures when income is in the hands of a few people while the majority are suffering
- Price structures: figures of national income can be high because of inflation and this does not mean that people are better off. Also a commodity can be cheap in the country and this does mean that people are worse off due to low figures of national income.
- Differences in taste: Tastes of people in a country differ because of age, sex, education, tribal, cultural and religious differences. National income figures can be high when commodities produced or imported do not fit the tastes of the majority
- National income figures can increase when there is unemployment, this affects welfare of people/household
- National income figures can increase when government allocates expenditure in economically non-productive ventures like purchase of arms, paying foreign debts.
- Countries which earn their national income abroad may rise their national income figures but with little influence on the welfare of the population
CATEGORIES Economics
TAGS Dr. Bbosa Science
