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National income


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Assignment, Macro-Economics, BBA-BI 2nd semester, Ace Institute of Management

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National income

  1. 1. Macroeconomics Topic: National Income“How Does a nation determine the National Income?” Are the results always accurate?
  2. 2. Group Members• Chhitiz Shrestha• Digaj Amatya• Dhundup Tsering Lama• Manzil Bhattarai• Narayan Gurung• Niraj Taujale• Nirmal Shrestha
  3. 3. Need to Study National Income• The overall size of the country’s economy.• Economic growth trends in comparison to the previous year’s performance and the nation’s economic health.• The contribution of various production sectors to the national economy.• Future growth prospects.
  4. 4. Nepal: Economic Overview• Among the poorest and least developed countries in the world,• One-third of its population living below the poverty line• Agriculture is the mainstay of the economy, providing a livelihood for three-fourths of the population and accounting for about one- third of GDP
  5. 5. Nepal: Economic Overview• Industrial activity mainly involves processing of agricultural products, like – Pulses, – Jute, – Sugarcane, – Tobacco, etc.• Has considerable scope for exploiting its potential in hydropower, with an estimated 42,000 MW of feasible capacity
  6. 6. Nepal: Economic Overview• Challenges to Nepals growth: – Political instability – Technological backwardness, – Landlocked geographic location, – Civil strife and labor unrest, – Its susceptibility to natural disaster
  7. 7. Methods to calculate the NationalIncome• Product or Output Method: – Utilizes the overall value of goods and services produced by the country, – The output of a production unit can be the input for another unit, – Hence, this method suffers from ‘double counting.’• Income method: – Utilizes the overall income generated by various factors of production – Includes employee wages, income of self- employed people, profits earned by business houses, etc.
  8. 8. Methods to calculate the NationalIncome• Expenditure method: – Sum of all the expenditures incurred by the economy, – The formula to calculate aggregate expenditure is:• E = C + I + G + (X-M) – Where, – E = Expenditure – C = consumer expenditures – I = domestic investment – G = total value of government expenditures
  9. 9. Sources of National Income• Agriculture – Pulses, – Rice, – Corn, – Wheat, – Sugarcane, – Jute, – Root crops, – Milk, – Buffalo meat
  10. 10. Sources of National Income• Industries – Tourism, – Carpets, – Textiles, – Cigarettes, – Cement, – Brick production,
  11. 11. National Income of Nepal• GDP (Purchasing power parity): – $33.26 billion (2009 est.)• GDP (Official exchange rate): – $12.47 billion (2009 est.)• GDP (Real growth rate): – 4.7% (2009 est.)• GDP (Per Capita): – $1,200 (2009 est.)
  12. 12. National Income of Nepal• GDP (Composition by sector): – Agriculture: 35% – Industry: 16% – Services: 49%•
  13. 13. National Income of Nepal GDP (Composition by sector) 16% 35% Agriculture 49% Industry Services
  14. 14. National Income of Nepal•
  15. 15. Comparison with Bangladesh & Bhutan
  16. 16. Comparison with Bangladesh & Bhutan
  17. 17. Comparison with Bangladesh & Bhutan
  18. 18. Problems of calculating National Income (Is itaccurate?)• Lack of proper records• Unstable Political scenario• Lack of in depth data research• Data gaps• Lack of skilled experts• Income from Illegal activities• Radical change in the price level• Depreciation
  19. 19. Conclusion• National income not totally reliable• Lot of items excluded• Non-conventional estimating procedure used• Gives somewhat approximate values• Yet, vital in planning for the future• Provides necessary statistics• National Income – very important!
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