Question

Q 6 Explain how should the following be treated in estimating national income: A. Fees to a mechanic paid by the firm.
B. Interest paid by an individual on a car loan taken from a bank.

Answer 1

Answer:

Explanation:

(i) It is not included because it is an intermediate cost of the firm.  

(ii) It is not included because the loan is taken to meet consumption expenditure and therefore interest paid on such a loan is not a factor payment.  

(iii) It is included because it is an investment expenditure, a final expenditur