Explain five problems of using national income statistics to compare the living standards of citizens of Kenya and Tanzania. (10 marks)

24/11/2020

Problems of using national income statistics to compare the living standards of citizens of Kenya and Tanzania

Problems of using national income statistics to compare the living standards of citizens of Kenya and Tanzania include:

The two countries may have used different currency values to calculate their national income hence different standards of measure.
One country could be having a large subsistence sector whose income may not have been included in the measure of their income.
The levels of income distribution in one country may be too skewed compared to the other which may have a fair income distribution.
The two countries may have different references and economic priorities.
The two countries could be different in terms of resource endowment hence different abilities to generate income.
The climatic conditions in the two countries may be different leading to difference in demand and production.
Production activities may affect the health of citizens in the two countries differently.
The political realities in the two countries could be different affecting their stability and the security of citizens.
The degree of accuracy of the national income statistics are also different in both countries.

22/11/2020

Benefits of national income statistics to the government include:

Provides information on the country’s economic performance over a period of time.
Provides information to be used for making economic policies/budgeting/planning.
Provides information on the contribution of each sector of the economy to the national income.
Provides a breakdown on consumer expenditure and government expenditure.
Provides information on the distribution of income.
Provide information on the types of factor incomes in the economy.
Provide statistics for measuring the economic growth of the country.
Provides information that is used to measure the standard of living in the country.
Provide information used for comparing economic performance of the country across two or more years.

21/11/2020

Measures that may be taken by the government to curb unemployment include:

Diversification of economic activities.
Control of population growth.
Adoption of policies that encourage labour intensive methods of production.
Partner with the private sector to create employment.
Adopting relevant education system.
Encouraging direct foreign investment.
Encouraging efficient exploitation and use of locally available resources.
Availing investment finds through favourable credit like the Youth Fund and Uwezo Fund.

2/6/2020

Assumptions associated with the circular flow of income in a two sector economy

There are only two sectors/players in the economy.that is households and firms
Households spend all of their income on goods /services without making any savings
Firms spend all their revenues on factors of production /there is no reserving profits
There is no government interference /intervention
The economy is closed /no international trade
All outputs produced by firms is purchased by households/there is no surplus
There is no injections of income/additional investments/no financial sector

31/5/2020

Factors which may lead to an increase in a country’s national income
include: