Expenditure Method

What is Expenditure Method?

The expenditure method of calculating national income focuses on expenditures. Now expenditure refers to all the purchases made by residents, government, or business enterprises. The expenditure method takes the following elements into consideration:

  • Purchase of consumer goods and services by residents and households (C)
  • Government expenditure on goods and services (G)
  • Business enterprises’ expenditure on capital goods and stocks (I)
  • Net exports (exports-imports) (NX)

Hence, according to the expenditure method:

National Income = C + G + I + NX

However, the expenditure method excludes expenditure on second-hand goods and purchase of shares and bonds.

Q.1- Calculate GDP at MP by using Expenditure Method
S. No Items Amount (in `)
1 Final Consumption Expenditure 500
2 Final Investment Expenditure 600
3 Net Exports 300
Q.2- Calculate GDP at MP by using Expenditure Method
S. No Items Amount (in `)
(i) Private final consumption expenditure 800
(ii) Government Final Consumption Expenditure 450
(iii) Gross Domestic Investment 125
(iv) Net Exports 30
Q.3- Calculate GDP at MP by using Expenditure Method
S. No Items Amount (in `)
1 Household final consumption expenditure 7800
2 Public final Consumption Expenditure 6700
3 Gross Domestic Capital Formation 4500
4 Exports 3400
5 Imports 1200
Q.4- Calculate GDP at MP by using Expenditure Method
S. No Items Amount (in `)
1 Private final consumption expenditure 1200
2 Government Final Consumption Expenditure 2400
3 Gross Domestic Fixed Capital Formation 3500
4 Change in Stock 600
5 Exports – Imports 700
Q.5- Calculate GDP at MP by using Expenditure Method
S. No Items Amount (in `)
(a) Total Final Consumption Expenditure 1000
(b) Gross Domestic Fixed Investment 2000
(c) Closing stock 5000
(d) Opening Stock 4000
(e) Net Imports 1000
Q.6- Calculate GDP at MP by using Expenditure Method
S. No Items Amount (in `)
1 Private final consumption expenditure 2400
2 Government final Consumption Expenditure 2040
3 Gross Business fixed Investment 4200
4 Gross Public Investment 240
5 Gross Residential Construction 400
6 Change in Inventory 200
7 Net Exports 420
Q.7- Calculate GDP at MP by using Expenditure Method
S. No Items Amount (in `)
(i) Private final consumption expenditure 31300
(ii) Government final Consumption Expenditure 13300
(iii) Net Domestic Capital Formation 31100
(iv) Depreciation 1300
(v) Net Exports (-) 3100
Q.8- Calculate GDP at MP by using Expenditure Method
S. No Items Amount (in `)
1 Household final consumption expenditure 21400
2 Public final Consumption Expenditure 21600
3 Net Domestic Fixed Capital Formation 11200
4 Change in Stock 1100
5 Net Imports 3100
6 Depreciation 1200
Q.9- Calculate GDP at MP by using Expenditure Method
S. No Items Amount (in `)
1 Household final consumption expenditure 1400
2 Public final Consumption Expenditure 1600
3 Net Domestic Fixed Capital Formation 1200
4 Increase in Stock 800
5 Net Imports (-) 300
6 Consumption of Fixed capital 200
Q.10- Calculate GDP at MP by using Expenditure Method
S. No Items Amount (in `)
(i) Total Final Consumption Expenditure 2400
(ii) Net Business fixed Investment 2600
(iii) Net Public Investment 1800
(iv) Net Residential Construction 700
(v) Decrease in Stock 300
(vi) Depreciation 200
(vii) Exports 200
(viii) Imports 500

 

ANSWER KEY
Q.1 GDP at MP = ` 1400
Q.2 GDP at MP = ` 1405
Q.3 GDP at MP=` 21200
Q.4 GDP at MP=` 8400
Q.5 GDP at MP=` 3000
Q.6 GDP at MP=` 9900
Q.7 GDP at MP=` 73900
Q.8 GDP at MP=` 53400
Q.9 GDP at MP=` 5500
Q.10 GDP at MP=` 7100

The above mentioned is the concept that is explained in detail about Expenditure Method. To know more, stay tuned to BYJUS.

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