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