Question

Giving reason, explain how should the following be treated in estimating National Income:

(i) Electricity consumed by a firm.

(ii) Pension paid to retired employees.

(iii) Free treatment of the poor in hospitals.

Answer 1

Reason:

(i) Included in National Income because it results in inflows of income through productive activities.

(ii) It is not included in the national income because it is a transfer payment.

(iii) It is not included in national income because it is unproductive.