Question

State whether item given below is included in estimating national income. Give a reason in case to justify your answer.

Expenditure on the purchase of old house.

Answer 1

The purchase of an old house is not included in the estimation of national income because:

• It is a transfer of ownership of an existing asset, not a payment for the production of new goods or services in the current year.
• National Income includes only the value of newly produced final goods and services within the accounting year.
• The transaction does not generate new income for factors of production (land, labor, capital, entrepreneurship) in the current period.