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

While estimating National Income through the Expenditure Method, the following precautions must be taken: 1. Avoid Double Counting:
- Only final expenditure should be included, excluding intermediate goods and resale transactions. 2. Exclude Transfer Payments:
- Payments such as pensions, scholarships, and social security benefits should not be counted, as they are not part of actual production. 3. Include Imputed Values:
- The value of self-consumed goods, owner-occupied houses, and free public services should be estimated and included. Conclusion: Proper precautions ensure accurate measurement of national income and prevent overestimation or underestimation.