(a) "National Income is always greater than Domestic Income." Do you agree with the given statement ? Support your answer with a valid reason. (b) "In the estimation of Gross Domestic Product (GDP) using expenditure method, focus lies only on expenditure by the residents of the country." Do you agree with the given statement ? Give valid reasons for your answer.

Question

Accepted Answer

(a) National Income is NOT always greater than Domestic Income.

Reason:
- National Income (NNP_FC) = Domestic Income (NDP_FC) + NFIA
- If NFIA is negative (factor payments to foreigners exceed payments from abroad), National Income < Domestic Income
- If NFIA is positive, National Income > Domestic Income
- If NFIA is zero (closed economy), National Income = Domestic Income

(b) In GDP estimation using Expenditure Method, precautions:
1. Exclude intermediate goods to avoid double counting
2. Exclude transfer payments
3. Exclude second-hand sales
4. Exclude financial transactions
5. Include only final goods and services