Question

Why are pure exchange transactions not included in estimation of national in come of a country? Write any two examples of pure exchange transactions.

Answer 1

Pure-exchange transactions are excluded because they do not reflect current production (national income measures the value of goods and services produced in the current period) and including them would either double-count output or merely record transfers of ownership/purchasing power rather than new output.

Two examples of pure-exchange transactions:

• Sale of a second-hand car.
• Sale/purchase of financial assets (shares or bonds).