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

Steady state in solow model, conditions for steady state in solow model.in ...

conditions for steady state in solow model.in what respects is golden rule different from steady state?

Consumption, what is the impact of interest rate in consumption

what is the impact of interest rate in consumption

What has served as money?, As people went from barter societies to more adv...

As people went from barter societies to more advanced economies, money had to be invented. Several things successively served as money in the course of economic evolution. Arrowhea

Resulting market distortion, Consider a market for fish whose market demand...

Consider a market for fish whose market demand and market supply for fish are specified as Qd = 300 - 2.5 P and Qs = - 20 + 1.5 P respectively. The government decides to impose a p

Adam smith living in today''s economic climate, Imagine Adam Smith living i...

Imagine Adam Smith living in today's economic climate. Describe what current economic issues about which he might be most concerned with and state why?

Income and substitution effects of a price change, Income and Substitution ...

Income and Substitution Effects of a Price Change Indifference curve analysis can be used to separate the income effect (IE) from substitution effect (SE). This is shown in Fig

Why are economic models uses for trade-offs and trade, Why are Economic Mod...

Why are Economic Models uses for Trade-offs and Trade? Simplified representations of actuality a. production possibility frontier b. comparative advantage c. circular-

Kind of organization, Informal groups exist in almost every kind of organiz...

Informal groups exist in almost every kind of organization. Answer the following questions and provide examples to support your position: • What types of informal groups do you

Economists who believe that monetary policy, Those economists who believe t...

Those economists who believe that monetary policy is more potent than fiscal policy argue that the: A) Responsiveness of money demand to the interest rate is large. B) Responsive

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