Income generated from Aircrafts of Air India operating between Canada and England would be added to the domest

Question 67 of 75

Q. Income generated from Aircrafts of Air India operating between Canada and England would be added to the domestic income (NDP_FC) of ________. (Choose the correct option to fill in the blank) Options : (A) Canada (B) England (C) Both Canada and England (D) India

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Concept understanding — National Income Identity

The National Income Identity: Where Does a Country's Money Come From?

Imagine you're running a lemonade stand. Every rupee you earn comes from someone buying your lemonade. Now imagine the whole country as one giant lemonade stand — every rupee earned by anyone must come from someone else spending money. That simple idea is the heart of the National Income Identity.

The Everyday Intuition

Think of the economy as a circular flow. Households earn income by working for firms. Firms produce goods and services that households buy. What households spend becomes the income of firms, which then becomes wages, rent, and profit for households again. So:

Total spending in the economy = Total income earned in the economy

This isn't a theory — it's an accounting identity. It must be true because every rupee spent by one person is a rupee earned by someone else.

The Precise Meaning (NCERT Class 12, Macroeconomics, Chapter 2)

The National Income Identity breaks down total spending into four components. NCERT gives it as:

Y = C + I + G + (X - M)

Where:

$Y$ = National Income (GDP at market prices)
$C$ = Private Final Consumption Expenditure (what households spend on goods and services)
$I$ = Gross Investment Expenditure (spending on capital goods like machinery, buildings, and inventory changes)
$G$ = Government Final Consumption Expenditure (government spending on goods and services, not transfers)
$X$ = Exports of goods and services
$M$ = Imports of goods and services
$(X - M)$ = Net Exports (exports minus imports)

Why This Matters

This identity is the foundation of all macroeconomic analysis. Here's what it tells you:

1. It's a checklist for growth. If you want GDP ( $Y$ ) to rise, at least one of $C$ , $I$ , $G$ , or $(X-M)$ must increase. No other way exists.

2. It reveals trade-offs. If government spending ( $G$ ) rises but taxes don't, either consumption ( $C$ ) or investment ( $I$ ) must fall — unless net exports improve. This is the "crowding out" debate.

3. It explains recessions. During a downturn, consumption ( $C$ ) and investment ( $I$ ) typically fall. The identity shows why governments try to boost $G$ or encourage exports.

A Simple Diagram (Describe in Words) …

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Domestic income (NDP $_{FC}$ ) is a territorial concept. But 'domestic territory' is wider than political borders — it includes aircraft and ships owned and operated by a country's residents between two or more countries. Since Air India is an Indian resident airline, income from its aircraft operating between Canada and England is part of India's domestic income. The correct option is (D).

The question rests on the precise definition of domestic territory used in national income accounting.

Domestic income is territorial

Domestic income (NDP $_{FC}$ ) measures the value of factor incomes generated by production carried out within the domestic territory of a country during an accounting year, regardless of whether the factors are owned by residents or non-residents.

'Domestic territory' is wider than political frontiers

Crucially, the economic concept of domestic territory is broader than the geographical/political boundary of a country. As per the standard (United Nations) definition, the domestic territory of a country also includes:

Ships and aircraft owned and operated by the normal residents of the country between two or more countries;
Fishing vessels, oil and natural-gas rigs, and floating platforms operated by residents in international waters; and
Embassies, consulates and military establishments of the country located abroad.

_{FC}

Applying it to Air India …

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Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

BSEH Haryana Senior Secondary Class 12 (Commerce) 2026Set ANNUAL1 markMCQ
$Q. Which one is included in leakage in circular flow of income?$
(a) borrowing by firms
(b) public expenditure
(c) investment
(d) saving
›Reveal solutionSolution
Saving is the leakage; investment and government spending are injections.

In the circular flow of income, leakages (withdrawals) are incomes not passed on as consumption of domestic output — saving, taxes and imports. Injections are additions to the flow — investment, government expenditure and exports.

Borrowing by firms → finances investment → injection. …
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BSEH Haryana Senior Secondary Class 12 (Commerce) 2026Set ANNUAL1 markMCQ
$Q. Which of the following will not included in the national income?$
(a) Domestic Services
(b) Intermediate Goods
(c) Transfer Income
(d) All of the above
›Reveal solutionSolution
All three — domestic services, intermediate goods and transfer income — are excluded.

National income includes the market value of only final goods and services produced during a year. Exclusions here:

Domestic services (e.g. a housewife's own household work) — non-market, no payment, so not counted. …
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BSEH Haryana Senior Secondary Class 12 (Commerce) 2024Set ANNUAL1 markMCQ
$Q. In India National Income is calculated by :$
(a) Central Statistics Organisation
(b) Reserve Bank of India
(c) National Sample Survey Organization
(d) All of these
›Reveal solutionSolution

National income in India is computed by the CSO.

The Central Statistics Organisation (CSO), now part of the National Statistical Office (NSO) under the Ministry of Statistics, is responsible for estimating India's national income and other macro aggregates. The RBI and NSSO provide d …

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BSEH Haryana Senior Secondary Class 12 (Commerce) 2024Set ANNUAL1 mark
$Q. Fill in the blank : Goods and Services are ................ by Household Sector. (Consume / Production)$
›Reveal solutionSolution

Households consume the goods and services produced by firms.

In the circular flow, firms (the producing sector) produce goods and services, and households (the consuming sector) buy and consume them using the factor incomes they earn. Production is done by firms; …

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BSEH Haryana Senior Secondary Class 12 (Commerce) 2024Set ANNUAL1 markMCQ
$Q. Assertion (A) : Factor Income is earned income. Reason (R) : Domestic Income includes net factor income from abroad.$
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true, but Reason (R) is false.
(d) Assertion (A) is false, but Reason (R) is true.
›Reveal solutionSolution

A true (factor income is earned); R false (domestic income excludes NFIA).

Factor income (rent, wages, interest, profit) is received for rendering factor services in production, so it is earned income — the assertion is true. However, domestic income (NDP at FC) is the income generated within the domestic territory and does NOT include net factor i …

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BSEH Haryana Senior Secondary Class 12 (Commerce) 2020Set ANNUAL1 markMCQ
$Q. Which of the following methods deals with the problem of double counting?$
(a) Income Method
(b) Expenditure Method
(c) Product Method
(d) All of the above
›Reveal solutionSolution

The product (value-added) method addresses double counting.

Double counting means counting the value of a good more than once (its value as an intermediate input and again in the final good). The product method solves this by counting only the value added by each producing unit (output minus intermediate consumption), so the value of i …

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BSEH Haryana Senior Secondary Class 12 (Commerce) 2020Set ANNUAL1 markMCQ
$Q. State whether the following statement is True or False : Personal income includes interest on national debt.$
(a) True
(b) False
›Reveal solutionSolution

True — interest on national debt is part of personal income (a transfer).

Personal income is the income actually received by households, including both factor incomes and transfer incomes. Interest on the national/public debt is treated as a transfer payment to households and is therefore included in personal incom …

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BSEH Haryana Senior Secondary Class 12 (Commerce) 2020Set ANNUAL1 mark
$Q. Fill in the blank : Scholarship is ............. Income. (Transfer / Real)$
›Reveal solutionSolution

A scholarship is transfer income.

Transfer income is income received without any corresponding production or service (pensions, scholarships, gifts, donations). A scholarship is given as a grant, not as payment for a factor servic …

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←Previous questionQ54 — For a hypothetical economy, assuming there are only two firms (X and Y…→Next questionQ56 — Read the following Flow chart carefully and choose the correct option …

Q.Income generated from Aircrafts of Air India operating between Canada and England would be added to the domestic income (NDP_FC) of ________. (Choose the correct option to fill in the blank) Options : (A) Canada (B) England (C) Both Canada and England (D) India

Domestic income is territorial

'Domestic territory' is wider than political frontiers

Applying it to Air India …

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