Question

Explain income and expenditure method for calculating natural income.​

Answer 1

Answer:

Expenditure Method of National Income. The expenditure method of calculating National Income or Gross Domestic Product takes into account the final goods and services produced in a country during a period of time. The formula for calculating national expenditure is. National Income = C + I + G + (X−M)3

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Answer 2

National Income = C (household consumption) + G (government expenditure) + I (investment expense) + NX (net exports).

Now while calculating national income using the expenditure approach, you need to also deduct depreciation on capital assets and indirect taxes. Using the expenditure approach, national income can be represented as follows:

National Income = C (household consumption) + G (government expenditure) + I (investment expense) + NX (net exports).

Again, you while determining income using the expenditure approach, you need to exclude expenditure on second-hand goods, purchase of shares and bonds, expenditure of transfer payments (unemployment benefits, pension), and purchase of intermediate products.