Question

State any three precautions to be taken while estimating National Income by Expenditure Method.

Hint:

Only final goods, actual expenditures, and imputed values should be included while estimating national income.

Answer 1

When calculating National Income using the Expenditure Method, adhere to these precautions: 1. Prevent Double Counting:
- Include solely final expenditures; exclude intermediate goods and resale transactions. 2. Omit Transfer Payments:
- Do not count payments like pensions, scholarships, and social security benefits, as they do not represent actual production. 3. Incorporate Imputed Values:
- Estimate and include the value of goods consumed by producers, owner-occupied housing, and gratis public services. Conclusion: Strict adherence to these precautions guarantees an accurate National Income calculation, avoiding both over- and underestimation.