Items to be included or excluded in National Income with reasons class 12
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Questions and Answers of items to be included or excluded in national income with reasons
Q. 1 Rent received by Indian residents on their buildings rented out to foreigners in India.
Ans:- Yes, it is included in National Income as it is the part of factor income from abroad.
Q. 2 Construction of a New House.
Ans:- Yes, It is included in National income as it is the domestic capital formation. Therefor included in national income through the expenditure method. It leads to the production of goods and services in an economy.
Q. 3 Purchases by foreign tourists.
Ans:- purchase by foreign tourists is the exports and therefore, included in national income through expenditure method.
Q. 4 Winning or lottery prize and windfall gains.
Ans:- No, It is not included in national income as it does not add to the flow of goods and services in the economy.
Q. 5 Profits earned by the branches of a foreign bank in India.
Ans:- No, such income is the part of factor income to abroad. It is subtracted out of Domestic income to get National Income.
Q. 6 Increase in the prices of Stocks lying with a trader.
Ans:- No, Increases in the market price just add to the price rise. It does not add to the flow of goods and services in an economy.
Q. 7 Rent free house given to an employee by an employer.
Ans:- Yes, It is included in national income through Income Method. As it is a ‘wages in kind’ and part of Compensation of Employee.
Q. 8 National debt interest (Interest on public debt)
Ans:- No, It is not included in national income. It is the interest paid by the government on loans taken from the public for its own consumption. It does not add to the flow of goods and services in the economy.
Q. 9 Payment of fees to a lawyer engaged by a firm. (Expenditure by a firm on payment of fees to a chartered accountant).
Ans:- No, It is not included. It is an intermediate consumption as it involves purchases of services from one production unit (firm) from another production unit (lawyer). It is deducted from value of output to arrive at value added while calculating income through value added method.
Q. 10 Royalty
Ans:- It is included in national income as royalty add to the flow of goods and services in the economy.
Q. 11 Free medical facilities by the employer (free boarding and lodging provided to a domestic servant).
Ans:- Yes, It is included as it is a ‘wages in kind’ and a part of compensation of employees. It is included in national income by Income method.
Q. 12 Purchase of a machinery by a factory.
Ans: Yes, as it is the part of Domestic Capital Formation and included in national income through expenditure method.
Q. 13 Purchase of Taxi by a taxi driver.
Ans:- Yes, as it is the part of Domestic Capital Formation and included in national income through expenditure method.
Q. 14 Free boarding and lodging provided to a domestic servant.
Ans:- Yes, It is included as it is a ‘wages in kind’ and a part of compensation of employees. It is included in national income by Income method.
Q. 15 Financial help received by flood victims.
Ans:- No, it will not be included in national income as it is a transfer payment.
Q. 16 Gifts received by employer.
Ans:- No, it will not be included in national income as it is a transfer payment.
Q. 17 Receipts from sale of land.
Ans:- No, it will not be included in national income as it is only result in ownership title change and does not add to production of goods and services in the economy.
Q. 18 Profits of Reliance Industries from its chemicals business in Australia.
Ans:- Yes, it is included in national income as it is the part of factor income from abroad and added to national income through income method.
Q. 19 Expenditure on advertisement by the firm.
Ans:- No, It is not included as it is intermediate consumption and subtracted from the value of output in order to arrive as value addition in value added method.
Q. 20 Salaries received by Indian residents working in Russian Embassy in India.
Ans:- Yes, It is included in national income as it is the part of factor income from abroad and added to the domestic income to arrive at national income in income method.
Q. 21 Commodities used in scientific research.
Ans:- No, it will not be included in the national income as it is a part of intermediate consumption expenditure.
Q. 22. Subsidized lunch served to workers in a factory.
Ans:- Yes, it is a part of the compensation of employees and , therefore, it will be included in the national income.
Q. 23. Firm incurred expenditure on medical treatment of employees family.
Ans:- Yes, it is a part of the compensation of employees and , therefore, it will be included in the national income.
Q. 24. Earnings of shareholders from the sale of shares.
Ans:- No, it will not be included in National income. As it is a mere financial transaction where only ownership of title is transferred. It does not add to the production of goods and services in the economy.
Q. 25. Old Age pension.
Ans:- No, it will not be included as it is transfer payment and does not add to the production of goods and services in the economy.
Q. 26. Profits earned by an Indian bank from its branches abroad.
Ans:- Yes, it will be included in national income as it is the part of factor income from abroad. It is added to domestic income while arriving at national income in Income method.
Q. 27. Durable goods purchase by a household.
Ans:- Yes, it is included in national income as it is the part of private final consumption expenditure.
Q. 28. Purchase of a car by Household.
Ans:- Yes, it is included in national income as it is the part of private final consumption expenditure.
Q. 29. Commission of sale of second hand goods (Brokerage payment on sale of shares).
Ans:- Yes, it is included in national income as broker is paid for its productive service.
Q. 30. Insurance premium paid by an household.
Ans:- Yes, it is included in national income as it is part of private final consumption expenditure.
Q. 31. Dividend received by an Indian from his investment in shares of a foreign company.
Ans:- Yes, it will be included in the national income as it is the factor income from abroad. It is added to the domestic income to arrive at national income in Income method.
Q. 32. Expenditure by government in providing free education.
Ans:- Yes, it will be included in the national income as it is a part of the government final consumption expenditure.
Q. 33. Expenditure on free services, free education, police services by government.
Ans:- Yes, it will be included as it is the part of government final consumption expenditure.
Q. 34. Purchase of raw materials by a production unit.
Ans:- No, it will not be included as it is the part of intermediate consumption expenditure.
Q. 35. Milk Purchased by a sweet shop to make milk cake.
Ans:- No, it will not be included as it is the part of intermediate consumption expenditure.
Q. 36. Services rendered by family members to each other.
Ans:- No, it will not be included in the national income as it is difficult to estimate the market value of services provided as it involves love and affection.
Q. 37. Earnings of a self employed doctor having a clinic at his own residence.
Ans:- Yes, it will be included as it is the part of Mixed Income.
Q. 38. Growing vegetables in a kitchen garden of the house.
Ans:- No, it will not be included as it is not possible to estimate the market value of production.
Q. 39. Money received from sale of second hand goods.
Ans:- No, it will not be included in national income as it would lead to double counting as it has been already included.
Q. 40. Commission received by a dealer from the buyer and seller of a house.
Ans:- Yes, it will be included in the national income as it is the income of the dealer for his productive services.
Q. 41. Imputed rent of self occupied houses.
Ans:- Yes, it will be included in the national income as people living in such houses enjoy housing services similar to those in rented houses.
Q. 42. Expenditure on the construction of a flyover by the government.
Ans:- Yes, it will be included in the national income as it is a part of gross domestic capital formation.
Q. 43. contribution to provident fund by employer.
Ans:- Yes, it will be included in the national income as it is a part of the compensation of employee.
Q. 44. Value of interest foregone on loans provided by employer to employee.
Ans:- Yes, it will be included in the national income as it is a part of the compensation of employees.
Q. 45. wheat grown by a farmer but used entirely for family’s consumption.
Ans:- Yes, it will be included in the national income as it adds to the flow of goods and services in the economy.
Q. 46. Fees Received from students.
Ans:- Yes, It is included as it is part of private final consumption expenditure.
Q. 47. Entertainment allowance to an employee for entertaining business guests.
Ans:- No, It will note be included in the national income as it is intermediate consumption expenditure of the business.
Q. 48. Mineral wealth of a nation.
Ans:- No, As it is a part of National wealth and is not included in national income. However, that part of mineral wealth which has been extracted during the current year will be included in national income under the product method.
Q. 49 Receipt from sale of property, inherited from a relative.
Ans:- No, It will not be included in national income. It is mere a transfer of ownership title from one person to another. It doesn’t add flow of goods and services in the economy.
Q. 50. Value of wood purchased for manufacturing a table.
Ans. No, It will not be included in national income as it is part of intermediate consumption.
Q. 51. Expenditures on the purchase of cold drinks by a school canteen from the manufacturer.
Ans:- No, It will not be included in national income as it is part of intermediate consumption.
Q. 52. Transport expenses by a firm.
Ans:- No, It will not be included in national income as it is part of intermediate consumption.
Q. 53. Earning from a part-time job in McDonald’s by a student.
Ans:- Yes, it is included in the national income as it is income received for productive services.
Q. 54. Purchase of equipment for installation in a factory.
Ans:- Yes, it will be included as it is part of capital formation and included through expenditure method.
Q. 55. Direct purchase made abroad by the government.
Ans:- Yes, it will be included in the national income as it is a part of the government final consumption expenditure.
Q. 56. Payment of Interest tax.
Ans:- No, it will not be included in national income as all taxes are considered as transfer payments.
Q. 57. Payment of Death duty.
Ans:- No, it will not be included in national income as all taxes are considered as transfer payments.
Q. 58. Purchase of a truck to carry goods by a production unit.
Yes, it will be included in the national income as it is a part of the gross domestic capital formation.
Q. 59. Goods and services tax received by the government.
Ans:- No, it will not be included in the national income as it is an indirect tax and a compulsory transfer payment received by the government.
Q. 60. HP uses its own new laptops in its office for self-consumption.
Ans:- Yes, it will be included in national income as it adds to current flow of goods and services. Production of self consumption is the part of value of output.
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 |
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