Question

Critics of the National Income and Product Accounts (NIPA) argue that the accounts are outdated and fail to account for "intangibles" in our new knowledge-based economy. For example, many firms create copyrighted materials (movies, books, etc.) that, when completed, are much more valuable than just the value of the market place inputs that went into their production. What might be some of the problems associated with trying to include these intangibles in the NIPA?

A) The problem is actually minimal; the NIPA does not take the necessary steps to do the right thing.
B) The NIPA finds it difficult to place a value on something that is intangible.
C) The NIPA believes it is too easy for thieves to retrieve the information due to hackers.
D) The real problem is the timing of when to include such projects in the NIPA.

Answer 1

Answer: The correct answer is "B) The NIPA finds it difficult to place a value on something that is intangible.".

Explanation: The problem is to assign value to assets that are not material, that is, they are intangible, for some reasonable estimates can be made in order to include them in the gross domestic product to provide this statistic with greater precision.

For example: It is difficult to know what value can be assigned to a project that is not known if it will be completed or not and if it will be susceptible to market valuation?