How are the following treated in estimating national income from expenditure method? Give reason.
(a) Purchase of new car by a household
(b) Purchase of raw material by purchase unit.
(c) Expenditure by the government on scholarship to students
please guyzz it's urgent!!!!!!
Answers
Hey Mate !
a) Purchase of new car by a household: purchase of car is included in the national income because it is final consumption expenditure, which is part of national income.
b) Purchase of raw material by purchase unit: purchase of raw material by purchase unit is not included in the national income because raw material is intermediate goods and intermediate goods and service are excluded from the national income. Purchase of raw material, if included in national income will result in double counting.
c) Expenditure by the government on scholarship to student is not included in the national income because it is a transfer payment and no productive service is rendered by the student in exchange.
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