Which cost is considered for calculating the national income in India?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. Factor cost.
In India, the national income is calculated by considering various costs, including:
- Consumption expenditure: The total spending on goods and services by households.
- Investment expenditure: Spending by businesses on capital goods like machinery and buildings.
- Government expenditure: Government spending on public goods and services.
- Net exports: The difference between exports and imports.
- Factor incomes: Earnings from factors of production, including wages, rents, and profits.
These components collectively contribute to the country's gross domestic product (GDP) and national income.