Question

Explain briefly the expenditure method of national income.

Answer 1

Answer:

Expenditure method measures final expenditure on ‘Gross Domestic Product at market price (GDP at MP) during a period of account.

Since all domestically produced goods and services are purchased for final use either by consumers for consumption or by producers for investment, therefore, we take sum of final expenditure on consumption and investment. This sum equals GDP at MP. Final expenditure is the expenditure made on purchase of domestically produced goods and services for final use, i.e., for consumption and investment.