Why is a bank loan not included in GNP calculation?
Answer and explanation
Correct answer: Because a bank loan is a financial transaction, not income generated from current production
A bank loan is a financial transaction that transfers purchasing power from a lender to a borrower. The principal amount does not represent newly produced goods, services, or factor income, so it is not added to GNP. If the loan finances the purchase of a newly produced final good, the value of that good may be counted, but the loan itself is not. Interest may be treated separately as a financial service or factor payment under appropriate accounting rules.
Frequently asked questions
What is the correct answer to this question?
Because a bank loan is a financial transaction, not income generated from current production
Why is this the correct answer?
A bank loan is a financial transaction that transfers purchasing power from a lender to a borrower. The principal amount does not represent newly produced goods, services, or factor income, so it is not added to GNP. If the loan finances the purchase of a newly produced final good, the value of that good may be counted, but the loan itself is not. Interest may be treated separately as a financial service or factor payment under appropriate accounting rules.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Aggregates related to national income - GNP.
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