Expenditure Method
Expenditure method
Sum of all spending on new final expenditure on produces the final goods and services to measure at prevailing market price. Aggregate expenditure equals to the total consumption(C), investment (I), government purchasing (G) and net export with it’s the total of export minus the total of import (X-M). (Paul Crompton, 2004). Consumption means the individual purchase on the final goods and services after making a decision. Investment means an individual who wants to spend his money on new capital goods. One of the category of investment is spending on the physical capital. For example, invest on new equipment, machine, in order to produce the new product and services. Government purchases consist of government consumption and gross investment method. Government needs to use the money to produce the goods and services that are needed by the society. Import means buy the goods and services from other countries without getting any benefit from them. Export means sell the goods and service which are produced in our country to other countries.
Formula:
GDP= C+ I + G+ (X+M)
Income method
GDP is the value of the final goods and services produced in the economy market.
In this Gross Domestic Product (GDP) Income method was focus on final amount. GDP income method was sum of intermediate gods and expenses. For the example, the car company used as minus the value of the steel it uses in the production. In this case, we couldn’t accept intermediate goods such as used to produce cars within single firm. For example, some of the remaining revenues to pay the labour that we called labour income. Second, we need to rest goes to the firm that we called profit income.
The output of nation
Definition- It includes the final good and service which are new produced goods and services sold to the final or ultimate and users,
Intermediate goods and service are purchased for the addiotional processing and resale. For example, the supermarket purchase the goods to stock the shelves.
Double counting are the mistakes including the value of intermediate good plus the value of the final goods in GDP. The counting of the value is the same goods more than one.0
Expenditure method
Item RM
Personal consumption expenditure 1232.2
Indirect business tax 24
Investment 850
Imports 367.30
Factor income paid abroad 85
Personal income tax 113.8
Subsidies 56
Exports 460.4
Government expenditure 1055.2
Factor income received from abroad 107
Depreciation 44.6
- Gross domestic product at market price ( GDP mp )
= C+I+G+ ( x-m )
=1232.20+850+1055.2+ ( 460.40- 367.30 )
=3137.40+93.10
=3230.5
- Gross national product at market price ( GNP mp)
= GDP mp+ NPIA
= 3230.5+ ( 107-85 )
=3230.5+22
=3252.5
- Gross national product at factor cost ( GNP fc)
= GNP mp- indirect taxes + subsidies
= 3252.50-24+56
=3284.5
- Gross domestic product at factor cost ( GDP fc)
= GDP mp- indirect taxes+ subsidies
= 3230-24+56
=3262
- Net national product ( NNP mp )
= GNP mp- Depreciation
= 3252.50-44.60
=3207.9
- National income
= Gross national product at factor cost- Depreciation value
= 3284.50-44.60
= 3239.90
Or
National income= NNP mp+ subsidies- indirect taxes
= 3207.90+56-24
=3239.90
Income method