Expenditure Method of GNP Measurement

Expenditure Method of GNP Measurement

In expenditure of GNP measurement or calculation all expenditure incurred during the year is summed up. This expenditure includes consumption expenditure, Government expenditure, investment expenditure, and export minus import.

1.    Consumption Expenditure

Consumption expenditure can be classified into two expenditure i.e. immediate consumption expenditure like rice, wheat & consumption expenditure on the durable product like Television, juicer etc.

2.    Government Expenditure

Government also incurred expenditure for provision of services to the public i.e. health, educational and also expenditure on the infrastructure project (bridges, railway line, tunnels).

3.    Private Gross Investment Expenditure

People expenses their income in two ways i.e. personal consumption and investment expenditure i.e. amount spend on producing of new goods. Expenditure under this method means both new expenditure & expenditure on replacing existing goods.

4.    Export Income

Export income shall also be included while calculating GNP under expenditure method. Net income from export means export minus import expenditure.

5.    Excluded Expenditure

Following expenditure shall not be included under this method

·         Expenditure on partially manufactured goods (to avoid double counting)

·         Expenditure on old Goods (already taken in national income once they were new)

·         Transfer payment ( These are not expenditure rather gift)