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:Analyze Statement 1

• Sale of second-hand goods is not included in national income because:
  • These goods were already counted when they were produced for the first time.
  • Including them again would lead to double counting.
• However, any brokerage or commission earned in the sale of second-hand goods is included because:
  • It represents a current service rendered.
  • It adds to current production of services.

\[ \text{Statement 1 is true} \]
Step 2:Analyze Statement 2

• Goods produced for self-consumption are included in national income.
• This is because:
  • They contribute to current production.
  • Their value is estimated using imputed value.
• Examples include food grown by farmers for their own consumption.

\[ \text{Statement 2 is true} \]
Step 3:Conclusion
\[ \text{Both statements are correct} \]