Question

Whether the following items will be included in National Income? Give reasons for your answer.
(i) Purchase of a second hand machine from a domestic firm.
(ii) Interest received on loans taken by government.
(iii) Leave travel allowance paid to employees by a company.
(iv) Direct purchases made by resident households.
(v) Interest received on debentures by debenture-holders.

Answer 1

(i) No, as it has already been included in the year of its original purchase.
(ii) No, as such interest is treated as a transfer income because government generally borrows money to meet its consumption expenditure and no productive activity is linked with such loan.
(iii) Yes, as it is a part of COE.
(iv) Yes, it is a part of private final consumption expenditure.
(v) Yes. interest received is a factor income because debenture is a sort of loan taken by a production unit.