EXPENDITURE METHOD of national income measuring

        "EXPENDITURE  METHOD” :-  

                                                        

                                                 THE Expenditure method of measuring  National Income is also called Income disposal method .According To the Expenditure method, GDP_MP or gross domestic Product at market price is the aggregate of all the final expenditure in an economy during an accounting year.  

                     

            
                       “Y = C + I + G +(X – M)”   

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Y =  National income

C = Private final consumption Expenditure

 I =  final investment expenditure

G = government final consumption Expenditure

(X-M)= Net Export (export – import)

·    According to the expenditure method, GDP_MP as follows:-

i)           Private final consumption expenditure.

                            +

ii)       Government final consumption expenditure.

                            +

iii)    Government fixed investment.

                            +

iv)    Business fixed investment.

                            +

v)        Investment or residential construction

                            +

vi)    Change in stock ( Closing stock – opening stock)

                            +

vii) Net export ( Export – Import )

· Precautions Involved in calculating NI by expenditure method :-

The precautions while taken calculating national income by expenditure method are ……….

i)           Final expenditure is to be included to avoid double counting. Final Expenditure is expenditure on consumption and investment.

ii)        Intermediate expenditure like on raw materials, etc. is not in included in the calculation of national income.

iii)     Expenditure on second hand goods is not included as they have already been included when they were purchased originally.

iv)      Expenditure on shares and bonds is not included because buying financial asset is not a production activity because Financial assets are neither good nor services

       

2) VALUE ADDED METHOD:-

                     

                     Value add method define as that method, which measure the national income by estimating the contribution of each producing enterprise to production in domestic territory of the country an accounting year (1^th April to 31^th  March)

Value added method or product method also called INDUSTRIAL ORIGINE Method.

National Income = some total of Net value added at factor cost (NN_PFC or NVA_FC)

When value added method is use in an economy is divided into three different sectors ….

“Viz” 
          i) Primary sector’:- Which includes agriculture and allied activates such as fishing, mining, etc.

          ii) Secondary sector’:- Which includes manufacturing and construction.

        iii) Tertiary sector’:- Which included all types of Service rending activates.