Research project topic on Regression Analysis On National Income (From 1998 – 2003 A Case Study Of Federal Republic Of Nigeria)
The question of how an economy grows could come to mind at this juncture. It the amount of goods and services produced by an economy increases. If it does not increase yearly, it is not growing, even if it is growing, the rate of growth may not be uniform among years. Therefore it may not be possible to determine the condition of the economy.
In any case, an economy needs an indicator for measuring economy growth, this indicator is the monetary summation at all the commodities and service produced in an economy within a particular period of time usually a year.
To get national income of a country like Nigeria for instance, we take the list of the goods and services produced in the country during the year, assign values to them and add up. If we can do this year after year, we shall be able to make comparison of activities of Nigeria year after year. Then we can decisively determine whether the economy of Nigeria is growing, declining or stagnant. It is growing if the National income increases year after year, declining, if the National income is decreasing and stagnant it there is no difference in the National Income for years.
In measuring National Income, an indicator called Gross Domestic Product (GDP) is used at current price. It is therefore quite important here to point out the role that prices could play in the measurement of National Income. Prices of goods and services changes from time to time. These changes can affect any attempted estimates. Considerably. Therefore to get an idea of the real physical change in National Income from year to year, effect of price changes must be removed.
National Income should be measured in real terms and allow for changes in price levels. For instance whenever the economy experiences inflation, price rises while the quantities of goods and services may remain constant. Let us say that 2000, the total units of the go0ods and services realized in Nigeria amounted to 50,000 units and also 50,000 units in 2001. Let us further assume that the average per unit in 2000 was N10.00 while the price in 2001 was N15,000.
Nigeria’s income with GDP as an indicator for 2000 was 50,000 units X N10.00 = N5000,000 Nigeria’s income with GDP as an indicator for 2001 was 50,000 units X N15.00 = N750,000.
If the two figures were presented to a layman as final products of overall estimates for 2000 and 2001, he would be tempted to say that the National income for 2001 was higher than that of 2000. This is so monetarily but really the income for both year are equal. The difference in value was due to rise in p rice in 2001 while the quantities of goods and services were the same in both years.
The same thing can be applicable when a country experience deflation or depression. Therefore in measuring national income for different years using gross domestic product as an indicator effects of price changes must be given the normal due. In so doing the changes in economy can be determined appropriately.