A STUDY ON REGRESSION ANALYSIS ON NATIONAL INCOME

BACKGROUND TO THE STUDY: The sum of the money worth of all the commodities and services produced in a country during a specific time period, generally a year, is referred to as national income. At this point, the topic of how an economy expands may spring to mind. When a country's economy produces more products and services, it grows. It is not expanding if it does not rise annually, and even if it does, the pace of growth may vary from year to year. As a result, determining the state of the economy may be impossible (Babatunde, 2011).

In any event, an economy requires an indicator to track its progress; this indicator is the monetary total of all the goods and services produced in the economy during a given period of time, generally a year.

To calculate a country's national income, for example, we take a list of the commodities and services produced throughout the year, assign values to them, and sum them up. We would be able to compare Nigeria's activity year after year if we can accomplish this year after year. Then we'll be able to tell if Nigeria's economy is expanding, falling, or stationary. It is increasing if the national income grows year after year, dropping if the national income decreases year after year, and stationary if the national income does not change for years (Chika, 2019).

At present prices, a metric called Gross Domestic Product (GDP) is used to calculate national income. As a result, it's critical to emphasize the function that pricing might play in determining national income. The cost of products and services fluctuates throughout time. Any attempts at estimations may be harmed as a result of these modifications. As a result, the influence of price changes must be eliminated in order to gain a sense of the true physical change in National Income from year to year.

National income should be calculated in real terms to account for price fluctuations. When the economy faces inflation, for example, prices rise but the quantity of products and services remains unchanged. Let's imagine that in 2000, the total units of goods and services sold in Nigeria were 50,000, and in 2001, they were 50,000. Assume that the average unit price in 2000 was N10.00, and that the price in 2001 was N15,000 (Babatunde, 2011).

Nigeria's income in 2000 was 50,000 units X N10.00 = N5000,000, using GDP as an indicator. In 2001, Nigeria's gross domestic product (GDP) was 50,000 units x N15.00 = N750,000.

If a layperson were to compare the two statistics as the end outputs of overall estimates for 2000 and 2001, he may conclude that 2001's national income was larger than 2000's. This is so financially, but the revenue for both years is the same. The change in value was due to a spike in p rice in 2001, despite the fact that the quantity of commodities and services in both years were the same.

When a country experiences deflation or depression, the same thing might happen. As a result, when comparing national income across time using gross domestic product as an indicator, the impacts of price changes must be taken into account. As a result, changes in the economy may be accurately predicted.