Question

is net interest and depreciation parts of the national income component ? why ?

is net interest and depreciation parts of the national income component ? why ?

Homework Answers

Answer #1

In calculation of national income the consumer spending component is used. However this component doesn't indicate the standard of living levels of a nation and therefore I'm order to include it, depreciation is indeed subtracted from it. However, payment of interest on borrowings by the government is usually not included here as it is indeed considered as a non factor payment where the government usually gets to borrow for consumption purpose like to meet fiscal deficit etc.

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