Question

Giving reason explain how should the following be treated in estimating national income:

i. Expenditure on fertilizers by a farmer.
ii. Purchase of tractor by a farmer.

Answer 1

i. Expenditure on fertilisers by a farmer will not be included in the estimation of National Income because it is an intermediate consumption to improve crop productivity.

ii. Purchase of a tractor by a farmer will be included in the estimation of National Income because it is part of gross domestic capital formation.