Question

Which of the following are the precautions that are taken while calculating national income by expenditure method? 

विकल्प

• Only final expenditure is to be taken into account to avoid the error of double-counting of expenditures

• Expenditure on second-hand goods is not to be included, because such expenditure has already been included when they are originally purchased.

• Imputed value/ estimated value of expenditure on goods produced for selfconsumption should be taken into account, as these goods are reflected in the estimation of Gross Domestic Product (GDP)

• All of the above

Answer 1

All of the above

Explanation:

The following precautions regarding the calculation of National Income must be observed when utilising the spending method:

1. To avoid the error of double counting expenditures, only the final expenditure should be considered.
2. Expenditure on second-hand products is not to be included because such expenditure was already accounted for when the goods were purchased. Any commission or brokerage on such goods, on the other hand, is included because it is a payment for productive service.
3. Purchases of financial assets such as stocks and bonds are not included in total spending since they are only paper claims unrelated to the production of finished goods and services.
4. The government's expenditure on transfer payments is not to be included because such payments are unrelated to any productive activity and provide no value.
5. Because these items are reflected in the assessment of Gross Domestic Product, the imputed value/estimated value of expenditure on goods produced for self-consumption should be taken into account (GDP).