Question

Will the following be included in the national income of a country? Give a reason for your answer:

Gifts received from abroad

Answer 1

Gifts received from abroad are not included in the national income of a country because they are considered transfer payments, not payments for goods or services produced in the economy. National income includes only the value of final goods and services produced in the country during a specific period. Gifts are simply unilateral transfers from one person to another across countries, and no productive activity is involved in receiving them. Therefore, such gifts do not reflect the production of goods or services in the country and are not counted in national income.