Question

Two friends, Devanshi and Harshit, were discussing whether prize money from lottery winnings, should be included in India's National income. Harshit was of the view that it should be included, while Devanshi did not agree with him. As their Economics teacher, guide them with correct treatment of the same with valid argument.

Hint:

National income only includes income earned through the production of goods and services, and lottery winnings are not the result of productive activity.

Answer 1

Step 1: Define National Income.
National income refers to the total value of goods and services produced by a country in a given period. It includes wages, salaries, profits, rents, and other income generated by productive activities.
Step 2: Lottery Winnings and National Income.
Lottery winnings are considered unearned income, as they are not the result of any productive economic activity. According to the principles of national income accounting, only income generated from production is included in national income.
Step 3: Clarifying the Argument.
Harshit's view is incorrect as lottery winnings do not represent production. Devanshi is correct because national income should only include income generated through productive activities. Therefore, lottery winnings should not be included in national income.
Step 4: Conclusion.
As their economics teacher, you should explain that the correct treatment of lottery winnings is to exclude them from national income, as they are not earned through productive economic activities.