Expenditure methods, Macroeconomics

Assignment Help:

Expenditure method is also called Flow-of-Expenditure method, consumption and investment method, income Disposal method, etc.


Expenditure method measures the final expenditure on goods domestic product market prices during a year.

This method measure the expenditure on GDPMP during a year.

The various steps involved in the use of expenditure method are briefly summarized as follows:
    
1. First Step: It involves identification of economic units incurring final expenditure. Different economic units are:

(i) Household sector

(ii) Producer sector

(iii) Government sector

(iv) Rest-of-the world sector.
    
2. Second Step: It involves classification of final expenditure into the following categories:

(i) Final Consumption Expenditure:
    
(a) Private final consumption expenditure, and
    
(b) Final consumption expenditure of the government

(ii) Final Investment Expenditure:
    
(a) Gross domestic fixed capital formation,
    
(b) Changes in stocks, and
    
(c) Net acquisition of valuables.

(iii) Net exports:

Exports minus imports
    
3. Third Step: It involves the measurements of final expenditure. The various components of final expenditure are measured as follows:

To measure Private Final Consumption Expenditure, the volume of final sale of durable goods, semi-durable goods, non-durable goods and services to the consumer households and non-profit institutions serving households is multiplied by market prices (retail prices). The direct purchases of resident households made abroad are added. The direct purchases of resident non-resident households in the domestic market are deducted, i.e.,

Thus, according to the expenditure method GDPMP = Private Final Consumption Expenditure + Expenditure + Government Final Consumption Expenditure + Gross Domestic Investment + Net Exports.


Related Discussions:- Expenditure methods

Demand analysis, how the demand of pizzas in pizza hut affecting the market...

how the demand of pizzas in pizza hut affecting the market of fast food

The market demand for a factor, The market demand for a factor   The mar...

The market demand for a factor   The market demand curve for any input is not simply the horizontal summation of the individual demand curves of all the firms. This is due to th

Determine aggregate supply curve is vertical or not, Explain whether the fo...

Explain whether the following statements are true or false: a) The long run aggregate supply curve is vertical because economic forces do not affect long run aggregate supply.

What are the social economic and non economic factors, What are the social ...

What are the social economic and non economic factors? Development is also a procedure involving change in some social economic and non economic factors comprising: • Econom

#.., what are the purposes of taxation

what are the purposes of taxation

Describe the concept of economies of scale, Question: Using diagrams wh...

Question: Using diagrams where appropriate, describe the concepts of scarcity, choice and opportunity cost. Distinguish between negative and positive externalities, explain

Actively-managed mutual funds, A sample of 60 mutual funds was taken and th...

A sample of 60 mutual funds was taken and the mean return in the sample was 13% with a standard deviation of 6.9%. The return on a particular index of stocks (against which the mut

Overall effect of a change in real wages, Q. Overall effect of a change in ...

Q. Overall effect of a change in real wages? The supply of labor The supply of labour L S is assumed to be positively related to the real wage W/P

Demand for money and gdp, Q. Demand for money and GDP? The demand for m...

Q. Demand for money and GDP? The demand for money also relies on the GDP as GDP is closely associated to national income. If you choose to hold a fixed proportion of your wealt

Information technology department at wpu, A study by the Information Techno...

A study by the Information Technology department at WPU revealed company employees receive an average of four e-mails per hour. Assume the arrival of these e-mails is approximated

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd