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Question
Which one of the following is not a component of domestic factor income?
Options
Compensation of employees
Operating surplus
Mixed income of self-employed
Value of intermediate goods
MCQ
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Solution
Value of intermediate goods
Explanation:
Domestic factor income includes:
- Compensation of employees (wages, salaries, benefits)
- Operating surplus (profit, rent, interest)
- Mixed income of self-employed (income that is both labor and capital in nature)
However, the value of intermediate goods is not a factor of income. It is a cost of production and not a payment to factors of production. Including it would result in double counting, which is avoided in national income accounting.
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