Question

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

(i) Payment of excise duty by a firm.

(ii) Payment of interest by a firm.

Answer 1

Reasons: 

(i) Payment of excise duty only increases the market value of final goods and services. Therefore, this is not included in the estimation of national income. 

(ii) Payment of interest by a firm is included in the national income because a firm takes loans for productive purposes.