Items to be included or excluded in Domestic Income (Economics Class 12)
In Class 12 Economics board exams, there is a question of either 4 marks and 3 marks where examiners gives an item with situation. Whether the given items would be included or excluded in domestic income.
Let’s first understand, What generally is included in it.
The definition of Domestic income says, Factor income earned by all production units whether residents or non residents, located within the domestic territory of the country is included in Domestic territory.
Note:- Only factor income is considered transfer payments are not included either in domestic or national income.
Explain following items would be included or excluded in Domestic Income
We are going to solve as many questions as possible with valid reasons.
Q. 1 Rent received by an Indian resident from Russian Embassy in India?
Ans:- No, it will not be included in Domestic Income of India. As Russian Embassy does not come under domestic territory of India.
Q. 2 Profits earned by branches of foreign bank or foreign companies in India.
Ans:- Yes, it will be included in domestic income of India as profits are earned within the domestic territory of India.
Q. 3 Compensation of employees to the residents of Japan working in Indian Embassy in Japan.
Ans:- Yes, it will be included in the domestic territory of India. As the Indian Embassy is the part of Domestic territory of India.
Q. 4 Profits earned by a resident of India from his company in Singapore.
Ans:- No, it will not be included as the company is located outside the domestic territory of India.
Q. 5 Rent received by an Indian from his building in London?
Ans:- No, It will not be included, as building is located outside the domestic territory of India.
Q. 6 Profits earned by a company in India which is owned by a non-resident?
Ans:- Yes, it be be included, as profits are earned within the domestic territory of India.
Q. 7 Profits earned by branches of country’s bank in other countries.
Ans:- No, it will not be included in domestic income of India as country’s bank branches are located outside the domestic territory of India.
Q. 8 Salaries to Indian residents working in the Russian Embassy in India?
Ans:- No, it will not be included in domestic income of India as Russian Embassy in not the part of domestic territory of India.
Q. 9 Remittances from non-resident Indians to their families in India.
Ans:- No, It would not be included in Domestic Income of India as it is a current transfer from abroad. Transfer payment does not lead to value addition. Hence not included.
Q. 10. Profits earned by Indian Employees working in the Pakistan Embassy in India?
Ans:- No, it will not be included in domestic income of India as Pakistan Embassy is not the part of Domestic territory of India.
Q. 11 Windfall Gains:
Ans:- No, windfall gains are not included in the domestic factor income because they do not add to the flow of goods and services in the economy.
Q. 12 Capital Gains
Ans:- No, capital gains are not included in the domestic income as they arise on account of rise in the prices of assets and do not add to the flow of goods and services in the economy.
Q. 13 Factor income from abroad
Ans:- No, it is not included in domestic income as such factor income is earned outside the domestic territory of the country.
Q. 14 Services rendered by Housewives
Ans:- No, These are not included in domestic income as it is difficult to find their market value. Such services are priceless as rendered due to love and affection.
Q. 15 Scholarship given by the Government of India?
Ans:- No, it is not included in domestic income as it is a transfer payment and does not lead to any flow in goods and services.
Q. 16 Profits earned by a company partly owned by residents and partly owned by non-residents and located in India?
Ans:- Yes, it will be included as profits are earned within the domestic territory of India.
Q. 17 Expenditure on old age pensions by government.
Ans:- No, it is not included in the domestic income as it is a transfer payment.
Q. 18 Payment of bonus by a firm.
Ans:- Yes, it will be included in domestic factor income as it is a part of compensation of employees.
Q. 19 Broker’s Commission on the sale of an old car.
Ans:- Yes, it is included in domestic factor income as the broker’s received his commission in return for rendering his productive services.
Q. 20 Earnings of American Express Bank’s branch located in Chennai.
Ans:- Yes, it will be included in Domestic Factor income of India as the branch of express bank is located within the domestic territory of India.
Q. 21 Consultancy fees paid to a foreign expert.
Ans:- It will be included in the domestic income. as the income is generated in domestic territory of India.
Q. 22 Financial Sale and purchase of shares, bonds and debentures.
Ans:- No, it is not included in domestic income as it is merely a title transfer through sale it does contribute to the production of goods and services.
Q. 23 Compensation of employees paid by a foreign company located in India.
Ans:- Yes, It will be included in Domestic Income of India as foreign company located within the domestic territory of India.
Q. 24 Compensation of employees paid by American Embassy in India to resident Indians.
Ans:- No, It will not be included in Domestic Income of India as American Embassy is outside the domestic territory of India.
Q. 25. An Indian owned aeroplane operating between singapore and Dubai.
Ans:- Yes, it will be included in domestic factor income as it is a prat of the domestic territory of India.
Q. 26. Compensation given by insurance company to an injured worker.
Ans:- No, it will not be included in the domestic factor income as compensation is given by insurance company to employee and not by employer.
Q. 27 Payment of fees to a chartered accountant by a firm.
Ans:- No, it will not be included in the domestic factor income as payment of fees to a chartered Accountant is an intermediate expenditure for the firm. Hence, it is to be deducted from the value of output of the firm to obtain value added.
Q. 28 Gifts given by an employer to his employees on independence day.
Ans:- No, it will not be included in the domestic product as it is a transfer payment.
Q. 29 Purchase of goods by foreign tourists.
Ans:- Yes, It will be included in the domestic product as these are exports produced in the domestic territory.
Further Reading:-
| S.N | Topics |
| 1. | What is GDP Deflator |
| 2. | What are externalities in economics |
| 3. | Limitations of GDP as a measure of welfare |
| S.N | Topics |
| 1. | 150+ Numerical of Value Added Method |
| 2. | 150+ Numerical of Income Method |
| 3. | 150+ Numerical of Expenditure Method |
| 4. | 150+ Numerical of National Income and related aggregates |
| S.N | Topics |
| 1. | 250+ MCQs of National Income |
