(i) Expenditure on free services provided by government. (ii) Payment of interest by a Government firm.

Question

Giving reason, explain how should the following be treated while estimating national income: 

(i) Expenditure on free services provided by government. 

(ii) Payment of interest by a Government firm.

Answer 1

Reasons : 

(i) Expenditure on free services provided by Government should be included in the estimation of national income because expenditure on these services is a part of Government Final Consumption Expenditure.

(ii) Payment of interest by a Government firm should be included while estimating national income because it is a kind of factor payment