Business Economics the Limitations of the National Essay

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Business Economics

The Limitations of the National Income Accounts in How They Represent Our Standard of Living

The national income accounts have been the center piece in all matters concerning economics across the globe. These rules are a primary source of reference in determining the economic status of a given nation. It is the most preferred indicator of the rate of improvement and making comparison across nations. However, it is not the perfect indicator for the economic state due to its limitations that give a false image of the highlighted economy (McEachern, 448).

To start with, the national income accounts do not include other financial details such as the non-market productions in a given country. These include activities such as preparations in various productions. For instance, in preparing food in a restaurant, one does not include the energy used by the person preparing the food before taking it for sale. When such details are included then it becomes evident that some financial details are over stated. This is as a result of the exclusion of the non-market productions (McEachern, 449).

The nation has both legal and illegal activities that bring in revenue. Often, the national Income accounts consider the legal business deals leaving out the illegal trends. There other illegal income generating activities that take place in the market today. Despite being illegal, these activities are gaining popularity. Such include the buying and selling illegal drugs e.g. marijuana and cocaine. Nonetheless, they fetch in a significant amount of revenue.

The comparisons done across nations may portray a negative image of one of the countries being compared with another. For instance, there are countries that are lagging behind in economic affairs, other are struggling with internal weaknesses, yet other are flourishing.

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The National Income Accounts can be particularly misleading because they do not portray the actual image of the resident s welfare. This is because the incomes of the people vary significantly, and in order to obtain an equal income distribution, it would require intense research surveys as opposed to assumptions and estimations.

Chapter 16, Question 5

Importance of frictional unemployment in any economy

Frictional unemployment contributes remarkably in reducing the economic level of a nation. It refers to a time when the jobs in a given nation do not match with the man power available in the market. Such a situation is a cause of an economic slow down. In this context, the economy suffers because there is no much revenue coming through. Hence, it is crucial that the government works out frictional unemployment for the development of the economy (Gwartney, Stroup, Sobel & Macpherson 160).

It is a clear sign of the economic well-being and reflects the future of the economy of a country. This refers to a time when people seek for employment that best agrees with their ambitions. On the other hand, such unemployment is a grand opportunity to maximize in productions by picking the best employees. In this regard, the absence of such employment becomes a stumbling block for any progress to take place. On the other hand it is a means of stagnating and reducing economic growth.

It is beneficial to note that frictional unemployment contributes to meeting the demand and supply in the market. This….....

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