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1. Why do national income accountants compare the market value of the total outputs in various years rather than actual

physical volumes of production? what problem is posed by any comparison over time or the market values of various totat
outputs? How is this problem resolved?

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User Yujing
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1 Answer

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National income accountants compare the market value of the total outputs in various years rather than actual physical volumes of production because the market value provides an objective way of comparing outputs of different goods and services produced in various years.The problem posed by any comparison over time or the market values of various total outputs is the impact of inflation. Inflation makes it difficult to compare the output of goods and services between different periods because the prices of goods and services change over time.The problem is resolved by using a price index to convert the output values of different years into real output values. This involves dividing the nominal value of goods and services by the price index. The resulting figure is the real value of output.The price index is a measure of the average change in prices of goods and services produced in an economy. The most commonly used price index is the Consumer Price Index (CPI).

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User Dave Ford
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