National income problem of double counting

economics

1. By : Dhirendra Chauhan Problem of Double Counting

2. Problem of Double Counting “Counting the value of a product more than once in the measurement or estimation of national income is called double counting”

3. To avoid double counting, Two methods are adopeted . Final Product Method Value Added Method

4. Final Product Method According to this method , value of “ only final goods” and services are to be considered while estimating the GDP

5. 2. Value Added Method According to this method, sum total of value added by each firm should be taken while estimating GDP

6. Estimating Value Addition Enterprise Output Value of Output ( ₹ ) Intermediate consumption ( ₹ ) Value Added ( ₹ ) Farmer Wheat 500 200 300 Mill Flour 1000 500 500 Baker Bread 1500 1000 500 Total 3000 1700 1300 in the table, the gross value added by all the producing enterprises is Value Added Method: - ₹ 300 + ₹ 500 + ₹ 500 = ₹1300 Final Product Method : - ₹ 1500

7. Thank You