Which of the following is correct regarding the National Income?

I. Intermediate goods are not included in the calculation of national income.

II. Final goods are included in the calculation of national income.

Question

Question

This question was previously asked in

SSC CHSL Tier-I Exam 2022 Official Paper (Held On: 21 March, 2023 Shift 2)

Answer 1

The correct answer is Both I and II.

Key PointsNational Income Calculation

Intermediate goods are not included in the calculation of national income.
- Intermediate goods are products used in the production of final goods and services. Including them would result in double counting, as their value is already embedded in the value of final goods.
Hence, statement I is correct.
Final goods are included in the calculation of national income.
- Final goods are products that have completed the production process and are available for consumption or investment. These goods are counted in national income because they reflect the actual value of production in the economy.
Hence, statement II is correct.

Additional Information

National Income Overview
- National income is a measure of the total value of goods and services produced by a country within a specific period, typically one year.
- It is calculated using various methods, including the income method, production method, and expenditure method.
Exclusion of Intermediate Goods
- Excluding intermediate goods prevents double counting and ensures that only the value of final products is considered, providing a more accurate measure of economic output.
Inclusion of Final Goods
- Final goods are included in national income calculations because they represent the end product of economic activity, reflecting the actual value created in the economy.

Key facts about National income in India-

The first attempt to calculate the national income of India was made by Dadabhai Naoroji.
The first scientific method for calculating national income was made by Prof. V.K.R.V. Rao in 1931 but was not satisfactory.
The first official attempt was made by National Income Committee headed by Prof. P.C. Mahalanobis in 1949.
Central Statistical Organization (CSO) is responsible for calculating National income in India.