explain precautions of expenditure method
Answers
PRECAUTIONS OF EXPENDITURE METHOD. ..
(c) Precautions:
The following precautions need to be taken for correct estimation of national Income by expenditure method.
Alternatively, following items of expenditure should not be included:
(i) To avoid double counting, expenditure on all intermediate goods and services is excluded.
For example, purchase of vegetables by a restaurant, expenses on electricity by a factory, etc., are not included as they are for intermediate consumption.
(ii) Government expenditure on all transfer payments such as scholarships, unemployment allowance, old-age pension, etc. is excluded because no productive service is rendered by the recipients in exchange.
(iii) Expenditure on purchase of second-hand goods is excluded from national income because this type of expenditure is not
on currently produced goods. ..
these r the precautions of expenditure method....
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