Question

How would you treat the following item in estimating a country’s national product?

Purchase of shares in the stock market

Answer 1

The purchase of shares is not included in national product estimation as it is a financial transaction involving the transfer of ownership of existing assets, not current production. Such transactions do not add to the output of goods or services and are therefore excluded from national income. However, the commission or brokerage earned by stockbrokers for facilitating these transactions is included, as it is a payment for services rendered and reflects income generated during the current year.