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Question : 21
Total: 49
How should the following be treated in estimating National Income of a Country? Give valid reasons.
(i) Profit earned by Foreign Banks in India.
(ii) Expenditure on upgradation of fixed asset by a firm.
(i) Profit earned by Foreign Banks in India.
(ii) Expenditure on upgradation of fixed asset by a firm.
Solution:
(i) Profits earned by foreign banks in India are included in the estimation of National Income.
Reason: In the National Income accounting framework profits earned by foreign banks are considered the part of operating surplus. It is one of the components of GDP. GDP measures value of goods and services produced within the country regardless of nationality.
(ii) Expenditure on upgradation of fixed asset by a firm: Included in national income.
Reason: It is expenditure on capital formation. So it is a type of investment expenditure and it is included in the estimation National Income on consumption as well as on investment.
Reason: In the National Income accounting framework profits earned by foreign banks are considered the part of operating surplus. It is one of the components of GDP. GDP measures value of goods and services produced within the country regardless of nationality.
(ii) Expenditure on upgradation of fixed asset by a firm: Included in national income.
Reason: It is expenditure on capital formation. So it is a type of investment expenditure and it is included in the estimation National Income on consumption as well as on investment.
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