question_answer

Giving reason explain how should the following be treated in estimating national income:

(i) Expenditure on fertilizers by a farmer.

(ii) Purchase a tractor by a farmer.

Answer:

(i) Expenditure on fertilizers by a farmer should not be included in the estimation of National Income. This is because it is an intermediate consumption that a farmer purchases in order to enhance the crop productivity, so that he can sell more output.

(ii) Purchase of tractor by a farmer should be included in the estimation of National Income. This is because it is a part of Gross Domestic Capital Formation.