Treatment of Different Items in National Income.

Criterion. National income includes factor income and the factor income is the reward which a factor of production gets in return for rendering productive services or for contributing to the flow of goods and services. Thus our criterion to include a particular item or transaction in national income (or any other related aggregate like domestic income, etc.) is whether or not it is the result of rendering productive service or addition to the current flow of goods and services. So incomes corresponding to which there is no flow of goods and services or no value addition are not included. It may be noted that domestic income of a country includes only those incomes which have been earned/generated within domestic territory of that country irrespective of whether the producer (enterprise) is national (citizen) of that country or foreigner. Again all embassies of a country located in any part of the world are treated as part of domestic territory of its own country.