what should be the method to find expenditure method?
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The expenditure method is a method for calculating gross domestic product (GDP), which totals consumption, investment, government spending and net exports. The expenditure method is the most common way to estimate GDP, and it says everything that the private sector, including consumers and private firms, and government spend within the borders of a particular country must add up to the total value of all finished goods and services produced over a certain period of time. This method produces nominal GDP, which must then be adjusted for inflationto result in the real GDP. hope it help..
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Method:--
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 theexpenditure made on purchase of domestically produced goods and services for final use, i.e., for consumption and investment.
Under expenditure method national income is calculated first by adding up all the items of final consumption expenditure and final investment expenditure within the domestic economy The resulting total is called GDP at MR By subtracting depreciation and net indirect taxes from GDP at MP and adding to its net factor income from abroad, we get NNP at FC or national income. Thus, under expenditure method, national income is measured at the point of actual expenditure.
Mind, income generated by factors of production in the production process is spent by them on final goods. Final use of a commodity is either for consumption or for investment and expenditure on them iscalled Final Consumption Expenditure and Final Investment Expenditure, respectively By adding up all the items of final consumption expenditure and final investment expenditure within the domestic economy, we get the aggregate called GDP at MP
Steps involved:--
Expenditure method involves the followingsteps:
(i) Identification of economic units incurring final expenditure, e.g., household(or consuming) sector, firm (or producing)sector and government sector.
(ii) Classification of final aggregate expenditure into following components:
1. Private final consumption expenditure.
2. Government final consumption expenditure.3. Gross fixed capital formation.
4. Change in stocks.
5. Net exports.
(iii) Measurement final expenditure on the above components. Sum total of the above five items gives us the value of GDP at ME By deducting depreciation and net indirect taxes from GDP at MP we get NDP at FC.
(iv) Estimation of net factor income from abroad which is added to NDP at FC (Domestic Income) to obtain NNP at FC (National Income).
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 theexpenditure made on purchase of domestically produced goods and services for final use, i.e., for consumption and investment.
Under expenditure method national income is calculated first by adding up all the items of final consumption expenditure and final investment expenditure within the domestic economy The resulting total is called GDP at MR By subtracting depreciation and net indirect taxes from GDP at MP and adding to its net factor income from abroad, we get NNP at FC or national income. Thus, under expenditure method, national income is measured at the point of actual expenditure.
Mind, income generated by factors of production in the production process is spent by them on final goods. Final use of a commodity is either for consumption or for investment and expenditure on them iscalled Final Consumption Expenditure and Final Investment Expenditure, respectively By adding up all the items of final consumption expenditure and final investment expenditure within the domestic economy, we get the aggregate called GDP at MP
Steps involved:--
Expenditure method involves the followingsteps:
(i) Identification of economic units incurring final expenditure, e.g., household(or consuming) sector, firm (or producing)sector and government sector.
(ii) Classification of final aggregate expenditure into following components:
1. Private final consumption expenditure.
2. Government final consumption expenditure.3. Gross fixed capital formation.
4. Change in stocks.
5. Net exports.
(iii) Measurement final expenditure on the above components. Sum total of the above five items gives us the value of GDP at ME By deducting depreciation and net indirect taxes from GDP at MP we get NDP at FC.
(iv) Estimation of net factor income from abroad which is added to NDP at FC (Domestic Income) to obtain NNP at FC (National Income).
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