Question

Why should the following be not included in national income? Give a reason.

Purchase of a truck to carry goods by a production unit.

Answer 1

The purchase of a truck to carry goods by a production unit should not be included in national income because it is an intermediate good used in the process of production, not a final good. To avoid double counting, national income includes only the value of final goods and services. The truck is a capital good that helps in the production of other goods, and its value is already included in the value of the final goods produced by the production unit. Therefore, including the truck separately would lead to double counting in the calculation of national income.