question_answer

Comparing reason explain how should the following be treated in estimating National Income:

(i) Interest paid by banks on deposits by individuals.

(ii) National debt interest.

Answer:

(i) Interest is a factor payment by a producer, so, interest paid by banks on deposits by individuals is included in the estimation of National Income.

(ii) National debt interest is a transfer payment and this loan is taken for consumption purposes. So, it is not included in the estimation of National Income.