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

Which of the following statements is correct, Which of the following statem...

Which of the following statements is true? a. economic profit equals accounting profit minus implicit costs b. the short run is any period of time in which there is at least

Output-maximizing model, For a single nonprofit provider, describe an outpu...

For a single nonprofit provider, describe an output-maximizing model to predict supplier behavior.

What are the production elasticities of demand, The following Cobb-Douglas ...

The following Cobb-Douglas production function is used to describe the output generated by a local government maintenance agency. Q = αL β1 K β2 E β3 Where L represents numb

Consumption , . (40 points) Consider two consumers, A and B. A and B both w...

. (40 points) Consider two consumers, A and B. A and B both want perfect consumption smoothing (c = cf) and both have no current wealth. However, the two consumers have different i

Determination of gdp in the cross model, Q. Determination of GDP in the cro...

Q. Determination of GDP in the cross model? In the cross model, GDP is determined as the solution to the equation Y D (Y) = Y We may explain

Discuss about asymmetric information, A) With asymmetric information, free ...

A) With asymmetric information, free markets may not lead to efficient outcomes because the market for a service or product may break down due to adverse selection. Explain what ad

Create a gantt chart of online food store, In today's world when almost ev...

In today's world when almost everything has become easy with just a click on the mouse, even shopping for normal groceries has been revolutionized by making it online. The project

Influx of foreign labor, If a nation were to experience an influx of foreig...

If a nation were to experience an influx of foreign labor into the market for corn production, the production possibilities frontier for the nation would: a. shift inward due to

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