Giving reason explain how the following should be treated in estimatio

1.	Giving reason explain how the following should be treated in estimation of national income.
Answer» (i) Payment of interest by a firm to a bank:- Included – Treated as factor payment by the firm because the firm borrows money for carrying out production and therefore included in National Income. (ii) Payment of interest by a bank to an individual:- Included- treated as a factor payment because bank borrows for carrying out banking services and therefore included in NI. (iii) Payment of interest by an individual to a bank:- Not Included- because the individual borrows for consumption and not for production.

Giving reason explain how the following should be treated in estimation of national income.

Answer»

(i) Payment of interest by a firm to a bank:- Included – Treated as factor payment by the firm because the firm borrows money for carrying out production and therefore included in National Income.

(ii) Payment of interest by a bank to an individual:- Included- treated as a factor payment because bank borrows for carrying out banking services and therefore included in NI.

(iii) Payment of interest by an individual to a bank:- Not Included- because the individual borrows for consumption and not for production.

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