CA Foundation · Business Economics · Determination of National Income
Which of the following is correctly included while measuring national income by the expenditure method for the current year?
Increase in inventories of unsold finished goods is included, as it counts as investment expenditure on output produced during the current year. Share purchases, pensions and second-hand house purchases are financial, transfer or past-production items and do not enter the expenditure method.
- APurchase of shares in the stock market by households
- BIncrease in inventories of unsold finished goods held by firmsCorrect
- CPension payments made by the government
- DPurchase of a second-hand house by a household
Explanation
Change in stock of finished goods is part of gross investment because the output was produced this year, even if unsold. Share purchases are financial transactions, pensions are transfer payments, and a second-hand house was produced earlier, so these are excluded.
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