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Items Excluded in GDP

Which of the ...

Question

Which of the following expenditures incurred are on intermediate products and which are on final products? You must state reason for your answer:
(i) Purchase of ticket for train journey by an individual.
(ii) Purchase of eatables by a firm.
(iii) Purchase of a car by an employer for office use by his employees.

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Solution

Intermediate Products: (ii)
Final Products: (i), (iii).

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Q. Classify the following expenditures as intermediate consumption expenditure and final consumption expenditure.
(i) Expenditure on research and development by Tata.
(ii) Insurance premium paid by a firm to an insurance company.
(iii) Insurance premium paid by households to an insurance company.
(iv) Expenditure on repairs and maintenance of plant and machinery.
(v) Expenditure incurred by a firm on purchase of equipments.
(vi) Advertising expenditure incurred by Airtel on promotion of Its products.
(vii) Business expenses of the employees on tour and entertainment.

Q. By giving reason, explain how should the following be treated in estimating gross domestic product at market price?
(i) Fees to a mechanic paid by a firm.
(ii) Interest paid by an individual on a car loan taken from a bank.
(iii) Expenditure on purchasing a car for use by a firm.

Q. Whether the following items will be included in National Income?
(i) Purchase of books by a student.
(ii) Bonus to employees.
(iii) interest paid by an individual on loan taken.
(iv) Expenditure on repair of fixed capital asset.
(v) Free medical facilities by the employer.

Q. Classify the following as final goods or intermediate goods.
(i) Machine purchased by a firm.
(ii) Soft drinks purchased by the school canteen.
(iii) Clothes purchased by an individual.
(iv) Coal purchased by a factory.
(v) Electricity consumption In a business.
(vi) Book purchased by a student.
(vii) Books purchased by a book seller.
(viii) Postage stamps purchased by a consumer.
(ix) Postage stamps purchased by a business unit.
(x) Exhaust fans used for making water coolers.
(xi) Seeds purchased by a farmer to produce wheat.
(xii) Seeds purchased for kitchen gardening.
(xiii) Machihes purchased by a dealer of machines.
(xiv) Car purchased by a household.
(xv) Sewing machine purchased by a housewife.

Q. Whether the following items will be included in National Income? Give reasons for your answer.
(i) Free meals to beggars.
(ii) Wages received by an Indian working in British Embassy.
(iii) Medical facilities to government employees.
(iv) Purchase of vegetables by a restaurant.
(v) Government Expenditure on street light.

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