question_answer

Giving reason explain how should the following be treated in estimating gross domestic product at market price?

(i) Fees to a mechanic paid by a firm.

(ii) Interest paid by an individual on a car loan taken from a bank.

(iii) Expenditure on purchasing a car for use by a firm.

Answer:

(i) Fees paid to a mechanic by a firm will be included while estimating the gross domestic product at market price. This is because the fees in being paid in return for the services offered by the mechanic. Thus, as \[GD{{P}_{MP}}\] includes the market value of all die goods and services produced in a country, it will be included.

(ii) Interest paid by an individual on a car loan taken from a bank will be included while estimating the gross domestic product at market price. This is because it is an income for the bank. Thus, it will be a part of\[GD{{P}_{MP}}\].

(iii) Expenditure on purchasing a car for use by a firm will be included while estimating the gross domestic product at market price. This is because the car is being purchased by the firm for its usage and not for other purposes.