Expenditure method

In this method,national income is measured from the expenditure side.The idea implicit in this method is that the gross domestic expenditure is also the gross domestic product.Since all goods and service product in a country are purchased by the consumers,the money value of GNP equals
national expenditure.
In this method,national is calculated by adding all the expenditure made by individuals,business and the government on goods and services during the year.Because,the goods and services are produced by the consumer and the government.The stock not purchase by the consumer and the government is assumed to be purchase by the producer themselves.Similarly, the saved amount is also invested to get addition income.Hence,if the consumption expenditure and the investment expenditure are added,the national expenditure and national income become equal.
It is now obvious that if all the expenditure made by individuals and t he government on consumption and investment are added,gross domestic expenditure (=GDI) is derived.Total expenditure included the following items:

• Private consumption expenditure(C)
• Gross domestic privet investment(I)
• Government expenditure on goods and service(G)

The addition or subtraction of net foregone export foreign investment (X-M) to gross domestic expenditure gives gross national income (GNI).The subtraction of depreciation fund from GNI gives net national income (NNI).It can be expressed as,
Gross domestic expenditure +net income from abroad =gross national income -depreciation fund =net national income.
According to this method GNP consists of t he following elements:

1. Privet consumption expenditure :The expenditure made by individuals on durable goods like car,washing machine,computer,television set and non-durable goods like cloths,shoes,food,beverage produced in a country during a year are included under this heading.Besides,the expenditures made on services like communication,transport,education are also included .
2. Gross domestic privet investment :The expenditure made by individuals on capital goods like building,machine,equipment are included in this heading.It also included the investment made in new and replacement of old capital.But the expenditure made on the goods and service produced in past and the financials investment made in credit intrustment are not included.
3. Government expenditure on consumption investment :The government (state,local and central ) spends on the goods like paper,pen,cloths and the services like employees,police and army.The capital expenditure made on national security and different are also regarded as the consumption expenditure.The government investment on capital goods like machine,equipment for government enterprises.
4. Net foreign investment :The different between export and import is the net foregin investment.Since the imported goods are not produced in a country,they should not be included in national income.The goods exported are produced in a country.Hence,the value of imports should be deducted from the value of exports.If the result,it should be added to other expenditures and if negative,it should be dedicated from other expenditure.

Now the question crops up which is the best national income measure? As opined by R.g. Lipsey and C.Harbury,"To ask which is the best national income measure is something like asking which is the best carpenter's tool."The answer depends on the job to be done.