What precautions should be taken while calculating national income according to expenditure method?


The following precautions should be undertaken;

(i) Expenditure on second-hand goods should not be included for such goods are not a part of current flow of goods and services produced.

(ii’) Expenditure on purchase of both old and new shares by people not is included as no produc­tion of goods or services has taken place corresponding to the above expenditure.


(iii) Government expenditure on transfer payments such as old age pensions is excluded as no service has been provided by those who receive it.

(iv) Only expenditure on final goods and services is to be included, otherwise there will be double counting.

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