CBSE 2025, Set 1

Question

(a) (i) Explain any two precautions to be adopted while estimating National Income by Expenditure method.
(ii) "Higher Gross Domestic Product (GDP) always means higher per capita availability of goods in the economy." Defend or refute the given statement as the index of welfare of the people of that country.

Edvaya · Accepted Answer

The correct answer is Subjective. **(i)** Two precautions to be adopted while estimating National Income by Expenditure Method are:
* Expenditure on intermediate goods should not be included as it will lead to the problem of double counting.
* Expenditure on purchase of second-hand goods should not be included as it does not add to the flow of goods and services in the current year.
*(Any other valid precaution to be awarded marks)*

**(ii)** The given statement is **refuted**. Gross Domestic Product (GDP) may not affect the welfare of all the sections of the society in the same dimension. This is because a given rise in GDP may not increase the per capita availability of goods due to concentration in a few hands. For the rest, the income may have fallen. In such a case, the welfare of the entire economy may not increase despite the increase in GDP.

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Economics > Introductory Macroeconomics > National Income Aggregates

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