Expenditure Method

Expenditure Method - Expenditure Method: Both product and...

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Expenditure Method: Both product and income methods have their own limitations. Therefore the expenditure method is often employed as an alternative or as a remedial measure. Lord J.M. Keynes has in his General Theory (1936) introduced highly simplified income and expenditure equations. These are: Y=C+I Income approach Y=C+S Expenditure approach The value of national income (Y) is equal to total income earned either in the form expenditure on the consumption goods (C) on capital goods or investment (I). On the other hand, whatever income earned by the society is spent on purchasing consumption goods (C) or remains unspent and saved (S). The terms income and expenditure in this respect are relative and flexible. One person’s expenditure is another’s income and vice versa. In an over simplified equation as above only private consumption and private investment values have been taken care of. But actually, there are two more categories of expenditure which make significant contributions to
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This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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Expenditure Method - Expenditure Method: Both product and...

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