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Yogita Ingle 6 years, 2 months ago
The counting of the value of commodity more than once is called double counting. This leads to over estimation of the value of goods and services produced. Thus, the importance of avoiding double counting lies in avoiding over estimating the value of domestic product, e.g. a farmer produces one tonne of wheat and sells it for Rs.400 in the market to a flour mill.
The flour mill sells it for Rs. 600 to the baker. The baker sells the bread to the shopkeeper for Rs. 800. The shopkeeper sells the entire bread to the final consumer’s for Rs.900. Thus,
Value of Output = Rs. (400 + 600 + 800 + 900)
= Rs.2700
In fact, the value of the wheat is counted four times,
. the value of services of the miller thrice and the value of services by the baker twice.
In other words, the value of wheat and value of services of the miller and of the baker have been counted more than once. The counting of the value of. commodity more than once is called double counting.
To avoid the problem of double counting, following two methods are used:
(i) Final output method According to this method, the value of intermediate goods is not considered. Only the value of final goods and services is considered. In the above example, the value of final goods, i.e. bread is Rs. 900.
(ii) Value added method Another method to avoid the problem of double counting is to estimate the total value added at each stage of production. In the above example, the value added at each stage . of production is Rs. (400 +200 +200 +100)
= Rs. 900.
Posted by Khogendro Reang Reang 6 years, 2 months ago
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Yogita Ingle 6 years, 2 months ago
- Gross Domestic Product (GDP) is the market value of the final goods and services produced during a year within the domestic territory of a country.
- Here only final goods and services are counted to avoid the problem of double counting.
- For e.g. a farmer sold wheat to flour mill for Rs. 10 per kg. The mill grinds the wheat and sold the flour to a biscuit company for Rs. 12 per kg. The biscuit company uses the flour, sugar and butter to make 5 biscuit packets. He sold the biscuit to the consumer at Rs. 15 per biscuit packet.
- Here biscuits are the final goods that are purchased by the consumer. Wheat and wheat flour are the intermediate goods used in the production of final good.
- The value of Rs. 75 already includes the value of flour Rs. 12.
- Hence only the value of final goods and services.
Therefore, GDP = Value of output − Intermediate Consumption
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Gaurav Seth 6 years, 2 months ago
In the face of the prevailing food crisis, the country was clearly vulnerable to external pressure and dependent on food aid, mainly from the USA. Which, in turn, pushed India to change its economic policies. The government adopted a strategy for agriculture in order to ensure food sufficiency. Instead of the earlier policy of giving more support to the areas and farmers that were lagging behind, now it was decided to put more resources into those areas which already had irrigation and those farmers who were already well off. It was argued that those who already had the capacity could help increase production rapidly in the short period. Thus, the government offered high-yielding variety seeds, fertilisers, pesticides and better irrigation at highly subsidised prices. The government also gave a guarantee to buy the produce of the farmers at a given price. This policy provided boost in agricultural production which is known green revolution.
The consequences of the Green Revolution were as given below :
Positive :
(a)There was moderate agricultural growth particulary in wheat production.
(b) It raised the availability of food in the country.
Negative :
(a)It had increased polarisation between classes and regions.
(b)The stark contrast between poor peasantry and the landlords produced conditions favourable for the left-wing organisations to organise the poor peasants.
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Sia ? 6 years, 2 months ago
Main objectives of government budget are:
- Redistribution of income and wealth: It is one of the most important objective of the government budget. The government imposes heavy taxation on a high income groups redistribute it among the people of weaker section in the society. The government can provide subsidies and other amenities to people whose income levels are low. These increase their disposable income and this reduces the inequalities.
- Reallocation of Resources: Reallocation of resources in the manner such that there is a balance between the goals of profit maximization and social welfare. Government uses budgetary policy to allocate resources. This is done by imposing higher rate of taxation on goods whose production is to be discouraged and subsidies provided on goods whose production is to be promoted.
- Economic Growth: Another purpose of the government budget today is to study the generation of savings, investment, consumption and capital formation to assess the trend of growth in the economy to improve the standard of living of the people.
- Managing Public Enterprises: In the budget government can make various provision to manage public sector enterprises and also provides them financial help.
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