Question

State whether the following statements are true or false.

1) National income is computed every year.
2) Inclusion of value of intermediate goods leads to double counting.
3) GDP includes net income from abroad.
4) Financial year in India is leap year.
5) Services of housewives are included in national income.

Answer 1

1) National income is computed every year. - True
Explanation:
The above statement is true. National income is the net value of all the final goods and services produced by the normal residents of a country during an accounting year. It is calculated every year. The accounting period for calculating national income is from the 1st of April to the 31st of March of every year.

2) Inclusion of value of intermediate goods leads to double counting. - True
Explanation:
The above statement is correct. Inclusion of the value of intermediate goods leads to double counting as the value of intermediate goods is already reflected in the value of the final goods. Thus, if the value of intermediate goods is also included in the calculation of income, then it would mean that their value is included twice, first as their own value and second as a part of value of final goods. Thus, to avoid this problem only the value of final goods and services is included in the estimation of national income.

3) GDP includes net income from abroad. - False
Explanation:
The above statement is incorrect. GDP is the value of all the goods and services produced during an accounting year within the domestic country. As GDP is limited to the domestic territory, it excludes the net factor income from abroad.

4) Financial year in India is leap year. - False
Explanation:
The above statement is incorrect. Leap year is a year containing 366 days and comes after every four years. Whereas, the financial year is from 1st April to 31st March of every year and contains either 365 or 366 days. Thus, it is not necessarily a leap year.

5) Services of housewives are included in national income. - False
Explanation:
The above statement is incorrect. The services of the housewives are not included in the national income. This is because it is difficult to estimate the market value of such services.