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Inclusion/Non-Inclusion of Items in National Income

Identifying items to be included/not included in national Income Macroeconomics Chapter 4 - Measurement of National Income Q. Explain, giving reasons, whether the following will be included in the national income of India or not? 1. Purchase of eatables by a firm. No, it will not be included in the national income, as it an intermediate expenditure of the firm. 2. Interest received by individuals on their deposits with bank. Yes, it will be included in the national income, as the interest has been received on deposits of individuals, used for productive purposes by the banks. 3. Interest paid by an individual on loan taken to buy a motor-cycle. No, such an interest will not be included in the national income, as the individual has taken loan for consumption purpose. 4. Contribution to provident fund by employer. Yes, it will be included in the national income as a part of compensation of employees (social security contribution by employers). 5. Value of interest foregone on loans provided by an employer to employee. Yes, it will be included in the national income as a part of compensation of employees (in kind). 6. Wheat grown by a farmer to be used by for consumption by family. Yes, it will be included in the national income, as the production has added to the current flow of goods and services. 7. Expenditure incurred by Government on providing street lighting. Yes, it will be included in the national income as a part of Government final consumption expenditure. 8. Expenditure incurred by the government on providing free education. Yes, it will be included in the national income as a part of Government final consumption expenditure. 9. Purchase of stationery by a school for office use. No, it will not be included in the national income, as it an intermediate expenditure. (The stationery will get used up in providing administrative services by the office). 10. Payment of corporation tax to Government. No, it will not be included in the national income, as taxes are compulsory transfer payments to the Government. 11. Services rendered by family members to each other. No, it will not be included in national income, as it is difficult to estimate their market value. Moreover, such services are not performed for income generation or for sale in the market. 12. Family members working free on a farm owned by family. Yes, imputed value of such productive services will be included in national income. 13. Fees received from students. Yes, it will be included in the national income as a part of private final consumption expenditure. 14. Fees to a lawyer paid by a firm. No, it will not be included in the national income, as it is an intermediate expenditure of the firm. 15. Transport expenses incurred by a firm. No, it will not be included in the national income, as it is an intermediate expenditure of the firm. 16. Payment of interest by a firm. Yes, interest on loan taken by a firm will be included in national income, as the loan is taken for production purpose. 17. Entertainment allowance to an employee for entertaining business guests. No, it will not be included in the national income, as it is an intermediate expenditure of the firm. 18. Capital gains to Indian residents from the sale of shares of a foreign company. No, it will not be included in the national income, as it is a mere appreciation in the value of shares and does not add to the current flow of goods and services. 19. HP uses its own laptop in its office. Yes, it will be included in the national income, as it an investment by HP. 20. Mineral wealth of a nation. No, it will not be included in the national income, as it is an accumulated stock of wealth over the past and does not add to the current flow and goods and services. 21. Payment of interest on loan taken by an employee from the employer. No, it will not be included in the national income, as the loan is taken for consumption purpose. 22. Expenditure incurred by an individual on the education of a family. Yes, it will be included in the national income as a part of private final consumption expenditure. 23. Direct purchase abroad by the Government. Yes, it will be included in the national income as a part of Government final consumption expenditure. 24. Interest received on loans given to a foreign company in India. Yes, such an interest is included in the national income, as the loans have been given to the foreign company for production purpose. 25. Ravi works in US and sends money to his family in India. No, personal remittances are not included in national income, as these are transfer payments. 26. Scholarship given to students in India by a foreign company. No, scholarships are not included in national income, as these are transfer payments.