Explain how the following are treated in estimating National Income:(i

1.	Explain how the following are treated in estimating National Income:(i) Wheat is grown by a farmer for self-consumption. (ii) Earnings of the shareholders from the sale of shares. (iii) Services rendered by family members to each other
Answer» (i) Wheat grown by a farmer but used entirely for family’s consumption is a part of the contribution by him to the value of goods produced. Therefore, this is included in national income. (ii) Income from the sale of shares will not be included as such transactions do not contribute to the current flow of goods and services. These financial assets are mere paper claims and involve a change of title only. (iii) Services rendered by family members to each other are not included in the estimating national income because family members are not paid for their services. Moreover, it is difficult to the market value of their services.

Explain how the following are treated in estimating National Income:(i) Wheat is grown by a farmer for self-consumption. (ii) Earnings of the shareholders from the sale of shares. (iii) Services rendered by family members to each other

Answer»

(i) Wheat grown by a farmer but used entirely for family’s consumption is a part of the contribution by him to the value of goods produced. Therefore, this is included in national income.

(ii) Income from the sale of shares will not be included as such transactions do not contribute to the current flow of goods and services. These financial assets are mere paper claims and involve a change of title only.

(iii) Services rendered by family members to each other are not included in the estimating national income because family members are not paid for their services. Moreover, it is difficult to the market value of their services.

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