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Estimating national income by expenditure technique

Describe precautions to be taken in estimating national income by expenditure technique?

Answer: The following precautions are to be taken while evaluating N.I. by the expenditure technique.

A) Do not comprise expenditure on intermediate goods and services: Intermediate expenses are a portion of final expenditure therefore its inclusion leads to double counting.

B) Do not comprise expenditure on second- hand goods: Expenditure on such goods was accounted whenever they were purchased new.

C) Do not comprise expenditure on financial asset: Purchasing of financial assets merely leads to transfer of money from one person or one institution to the other person or institution.

D) Contain imputed expenditure on own account produced output employed for consumption and investment: The imputed value of owner occupied house, self consumed output by farmers and so on should be taken into account as estimating final expenditure.

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