Precautions for expenditure method

While estimating national income through expenditure method, the following precautions should be taken:

  • The expenditure on second hand goods should not be included as they do not contribute to the current year's production of goods.
  • Expenditure on purchase of old shares and bonds are not included as these also do not represent expenditure or currently produced goods and services.
  • Expenditure on transfer payments by government such as unemployment benefit, old age pensions, interest on public debt should also not be included because no productive service is rendered in exchange by recipients of these payments.
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