While estimating national income by the income method, which item is included in compensation of employees?
Answer and explanation
Correct answer: Employer’s contribution to an employee’s provident-fund account
Compensation of employees includes direct wages and salaries as well as employers’ contributions to social-security schemes, including provident funds. An old-age pension is a transfer payment; a capital gain comes from an asset-price change; and lottery money is a windfall receipt. None of these is payment for current employee service. Therefore, option A is correct.
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What is the correct answer to this question?
Employer’s contribution to an employee’s provident-fund account
Why is this the correct answer?
Compensation of employees includes direct wages and salaries as well as employers’ contributions to social-security schemes, including provident funds. An old-age pension is a transfer payment; a capital gain comes from an asset-price change; and lottery money is a windfall receipt. None of these is payment for current employee service. Therefore, option A is correct.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Methods of calculating national income - Income Method.
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