This question also attracted few of the candidates, most of whom scored above average marks. Candidates were expected to explain some national income concepts and to outline four problems associated with calculating national income using the income method in the (a) and (b) parts of the question respectively. The candidates that attempted this question were able to explain some of the national income concepts but could not really expatiate on their points in the (c) part of the question, hence their performance was a bit above average.

1. 1. National income is the total money received by the various factors of production in a country during a specific period of time.OR It is the total money value of all goods and service produced in a country within a period of a year.
   2. Personal income is the earnings of individuals or households for supplying factors of production( e.g. land, labour, and capital )for production to take place.
   3. Disposable income is the amount that is left for an individual to spend and save after income taxes have been deducted from his personal income.
   4. Real income is the quantity of commodities that money income can buy or it is the nominal income deflated by price level.
2. 1. Problems of double counting: This occurs when transfer incomes are added to national income thereby leading to overestimation of national income.
   2. Inadequate information as regards the incomes of the self-employed.
   3. Services not paid for : Some services such as that of full time housewives and other do-it-yourself services not paid for leads to underestimation of national incomes.
   4. Problem of determining the income from abroad as some income remitted may not pass through the official channel and therefore not captured in the estimate.
   5. Problem of owner occupied houses, the values which do not form part of the national income.
   6. Problem of determining the method of depreciation to be adopted and the actual value of depreciation.
   7. Illegal activities such as smuggling, under-invoicing etc. underestimate the value of the national income