Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: National Income Accounting

Question:

Which of the following will be included in national income, while using the income method to calculate the same?

Options:

National debt interest

Interest paid on a loan taken by a household from a bank to buy a car

Interest received on debentures of a firm bought by a household

Interest paid on a loan taken by an employee from his employer

Correct Answer:

Interest received on debentures of a firm bought by a household

Explanation:

National debt interest - National debt interest is a transfer payment thus, it won't be included in the national income. While computing the national income, we take into consideration only the factor payments.

Interest paid on a loan taken by a household from a bank to buy a car - It will not be included in the computation of national income as the loan is taken by an individual for consumption purposes and not production purposes.

Interest received on debentures of a firm bought by a household - Yes, it will be included in the national income as interest received will be considered as a factor income because the debenture which is issued is used for the purpose of production.

Interest paid on a loan taken by an employee from his employer - It will not be included in the national income because the loan taken by the employee from the employer is not clear whether it is for the purpose of production.