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?
Anurag Pathak Changed status to publish December 9, 2023
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.
Anurag Pathak Changed status to publish December 9, 2023
