Question

How will you treat the following while estimating National Income? Give reasons for your answer.

(i) Capital gain on sale of a house

(ii) Prize won in a lottery

(iii) Interest on public debt

Answer 1

(i) Capital gain on the sale of a house is not included in national income because it does not add to the flow of goods and services of the economy.

(ii) Prize won in a lottery is a transfer income and therefore not included in national income.

(iii) Interest on public debt is not included in national income because interest on consumption loans is considered to be a transfer payment. Public debt is usually accumulated to meet consumption requirements.