MEASUREMENT OF NY BY EXPENDITURE METHOD

                                             
MEASUREMENT OF NY BY EXPENDITURE METHOD

 Date: 01.05.2020

                    Expenditure method is that in which measured over all expenditure of a Nation at market price during an accounting year.

Final expenditure consists of expenditure on final consumption expenditure by Household and general government and investment expenditure by producing sector. Total expenditure by the economy equal to the Gross domestic product at Market Price.

Different steps involves to calculate NY by Expenditure method: -

A. IDENTIFICATION AND CLASSIFICATION OF  ECONOMICS UNITS INCURRING FINAL EXPENDITURE: -

1. Household sector,

2., Government sector

3. Producing sector,

4. Rest of the world sector

B. CLASSIFICATION OF FINAL EXPENDITURE: -

1.Final expenditure includes Private final consumption expenditure done by the household and Non- profit institutes serving household on durable goods, semi durable goods and non durable goods.

2. Final consumption expenditure by government: --

   1. Compensation of employee paid by govt.

2. Goods and services purchase by govt.

3. Govt. purchase from rest of the world.

 C. Gross Domestic capital formation: -

   (i) Expenditure on construction

(ii) Final expenditure on machines and Equipment.

 For making Gross domestic capital formation, includes: -

(a) Expenditure on change in stock

(b) Expenditure on acquisition of valuables.

3. NET EXPORT- It the different export of goods and service s and import of goods and services.

IV . Estimation of net factors income from abroad.

V. Estimation of Gross Domestic product at MP: -

    PFCE + GFCE + GDCF + NET EXPORT + NFIA

 FROM GDP at MP - DEPRICIATION - NIT

= NDPat FC

NNP at FC = NDP at FC + NFIA =  NNP at FC

PRECAUTIONS: -

1.Expenditure of second hand goods should not included.

2. Expenditure on intermediates goods and services should not included.

3. Expenditure on shares and bonds should not included.

4. Value of depreciation should not be included.

4. From GDP at MP deduct NIT.

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      Home Work:- 
Explain the different steps invokes in calculation of NY by Value added methods, Income and Expenditure method , Explain them briefly.