Is Expenditure on purchasing a machine installed in a production unit included/excluded in national income?
Is Expenditure on purchasing a machine installed in a production unit included/excluded in national income?
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Yes,
The expenditure on purchasing a machine installed in a production unit will be included in the national income as it is a part of the capital formation or investment by the firm.
Explanation:-
A machine purchased by a firm is an investment and is considered a final good.
The value of final goods is included in the national income.
In other words, the purchase of a machine by a firm is an addition to the present stock of capital during the year. It is called capital formation.
Capital formation is added to the national income through the expenditure method.
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