Question

Read the following statements carefully:
Statement 1: Brokerage earned by a dealer of second hand cars is included in the estimation of National Income.
Statement 2: Imputed value of production for self-consumption is included in National Income.

• A. Statement 1 is true and Statement 2 is false.
• B. Statement 1 is false and Statement 2 is true.
• C. Both Statements 1 and 2 are true.
• D. Both Statements 1 and 2 are false.

Hint:

Only current production is included in national income: second-hand goods are excluded, but services and self-consumption are included.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
National Income estimation follows specific rules regarding what counts as productive economic activity.
Step 2: Detailed Explanation:
Statement 1 is True: While the sale value of second-hand goods is excluded (to avoid double counting, as it was counted when first sold), the brokerage or commission earned by the dealer is included. This is because it is a payment for a fresh service provided in the current year.
Statement 2 is True: Production for self-consumption (like a farmer consuming his own wheat) contributes to the current flow of goods. Its value is "imputed" (estimated at market price) and included in National Income because it is a productive activity, even if the goods aren't sold in the market.
Step 3: Final Answer:
Both statements correctly identify items included in the National Income calculation.