Question

Q.1 Giving reason, explain how the following are treated in estimating national income:
(1) Wheat grown by a farmer but entirely for family's consumption.
(1) Purchased of a truck to carry goods by a production unit.
(III) Service rendered by the family members to each other.​

Answer 1

Answer:

(1) Wheat grown by a farmer is addition to the current flow of goods in the country no matter, it is used for self-consumption. Therefore, its imputed value should be included in national income when calculated through production method. (ii) Earnings from sale of shares should not be included in national income because shares are just paper titles which do not contribute directly in production. (iii) This, being final expenditure of the government, should be included in national income when calculated by expenditure method.

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Answer 2

Answer:

1. wheat grown by farmer,but used entirely for family's consumption will be included while estimating National Income, as the production is done for self-consumption purpose.

1.) It is investment and included through the expenditure method.

(III) There are productive service because similar services are also available in the market. Conceptually the value of these services must be included, but in practics, ignored due to non-availability of data.

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