Question

Giving valid reasons, explain how the following would be treated while estimating National income:

1. Payment of indirect taxes by a firm.
2. Purchase of goods by foreign tourists.

Answer 1

1. Payment of indirect taxes by a firm: It is not included in national income because it is paid to the government, and national income includes factor income accrued to factors of production.
2. Purchase of goods by foreign tourists: It is included in national income because it represents demand for goods manufactured in the country, and national income includes domestic income.