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Question

Which of the following is not a component of the expenditure approach to calculate national income?

A
Consumption
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B
Government revenue
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C
Investment
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D
Government expenditure
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Solution

The correct option is D Government expenditure
The expenditure method of calculating national income represents the sum total of all kinds of expenditure that flow in an economy in the form of consumption, investment, and government spending. It can be expressed as

National income = C (Consumption) + I (Investment) + G (Government expenditure)


Households represent the value of money spent in buying or consuming various goods and services.

Investment refers to the money spent by firms for setting up the business such as buying machines and availing labour resources in order to foster the growth of their businesses in future.

Government expenditure refers to the value of money spent on administration such as defence, law and order, health, education, and other public goods for public welfare.

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