National Income Expenditure Approach Formula

Learning objectivesexpenditure approach to national income accounting the formula to calculate national income by expenditure approachin the expenditure approach to national income the gdp at market price is the sum of consumption expenditure investment government expenditure export and import gdp at.

National income expenditure approach formula. The gdp under the expenditures approach is calculated using the following formula. Expenditure approach is one of the approaches or methods of calculating the gross domestic product gdp of the country by the way of adding the entire spending of the economy including the amount of consumption of goods and services by the consumer amount of spending on the investments spending of the government of the country on the infrastructures. And while calculating national income you need to calculate the net exports nx. Let s take a look.

National income can be defined by taking three viewpoints namely production viewpoint income viewpoint and expenditure viewpoint. Examples of expenditures that fall under this heading includes. Gdp c i g x m c stands for personal consumption expenditures and it represents the spending by individuals on goods and services for personal use. That is the total exports minus total imports.

With the above mentioned expenditure formula determine india s gdp for the financial year of 2018 2019. The formula for calculating national expenditure is. Gdp is gross domestic product and is an indicator to measure the economic health of a country. The duration of this period is usually one year.

Primary components used in expenditure method of calculating national income. The formula to calculate gdp is of three types expenditure approach income approach and production approach. 1 expenditure approach there are three main groups of expenditure household business and the government. National income c i g x m where c consumption by residents of.

Using the expenditure approach national income can be represented as. Under expenditure method national income is calculated first by adding up all the items of final consumption expenditure and final investment expenditure within the domestic economy the resulting total is called gdp at mr by subtracting depreciation and net indirect taxes from gdp at mp and adding to its net factor income from abroad we get nnp at fc or national income. Expenditure method of national income. Spending on purchase of.

National income is one of the broad indicators of a nation s economic activity and the formula for it can be derived by subtracting domestic production by non national residents and imports from the sum of consumption government expenditures investments exports and foreign production by national residents. The above mentioned types of aggregated expenses can be further broken down depending on the parameters these include. Expenditure approach for gdp definition. Now while calculating national income using the expenditure approach you need to also deduct depreciation on capital assets and indirect taxes.