Question

State three precautions to be taken while measuring national income by expenditure method?​

Answer 1

Answer:

(i) Do not include expenditure on transfer payment.

(ii) Do not include expenditure on purchase of financial assets.

(3) Do, not include expenditure on intermediate goods.

Answer 2

Explanation:

Precautions Regarding Calculation of National Income by Expenditure Method:

1. Expenditure on only final goods and services should be included in the national income estimation while intermediate consumption expenditure should not be included.

2. Similarly, expenditure on the purchase of second hand goods should not be included in the national income estimation of the current accounting year. This is because they have already been included in the national income of the accounting year in which they were originally purchased.

3. Expenditure on shares and bonds is not included. This is because these are mere financial assets and do not reflect any production activity of the goods or services.