Expenditure Method of Measuring National Income

One of the methods of measuring national income is the output method which I have already talked about; another method of measuring national income is expenditure method. Expenditure method of measuring national income measures the national income of a country by adding all the expenditures made by the people of the country and it also includes the expenditures made by the government of the country.

Expenditure method of national income measures only the value of final purchase made by the consumer; it does not include the expenditure on intermediate goods which are used for making final goods. Therefore one needs to make adjustment for taxes, subsidies, exports and imports made by the country during particular year.

After adding all the expenditures made by the individuals and the government of the country, one gets the figure of total domestic expenditure at market prices. From this figure one has to add exports and factor income from abroad and deduct imports and payments made abroad to get gross national product. In order to arrive at national income one has to add subsidies which are given by the government and deduct indirect taxes which are levied by the government.

2 comments… add one
  • piyush

    lets us have an glance over her…/
    its an offensive measure of measuring the national income
    i have gone through it , which was very useful to learn…!

  • vishal

    It is good but can you add a simple example to make it understand ?

Leave a Comment