Which of the following factors will not underestimate the national income?

Analyzing the question: The question asks which factor will NOT cause national income to be underestimated. In other words, three options cause underestimation (income is understated or not fully captured), and one does not.

Concept: National income is underestimated when economic activity is real but not recorded in official figures. Common causes:

• Subsistence production (output consumed by the producer and not sold in the market)
• Unpaid services (housewives' work, voluntary work, DIY)
• Illegal or informal activities, and unreported income
• Poor data collection, illiteracy, and lack of record-keeping

Evaluating each option:

• A. Rapid decrease in prices: Falling prices lower the money value of output. This understates nominal national income, so it contributes to underestimation.
• B. Increased subsistence production: Subsistence output is consumed rather than sold and is poorly recorded, so it leads to underestimation.
• C. Practice of specialization of labour: Specialization leads to exchange and market transactions. Goods and services are sold and recorded, so output is captured in official statistics. It does not cause underestimation. In fact, it improves measurement and raises output.
• D. Increase in value of services not paid for: Unpaid services such as housework are left out of national income accounts, so this causes underestimation.

Answer: The factor that does not underestimate national income is C.

Tip: Underestimation comes from things that are unrecorded or unpaid (subsistence, unpaid services, informal activity). Anything that pushes activity into the market, like specialization and exchange, makes measurement easier, so it will not understate national income.