Question

State and explain any two precautions that must be taken while estimating national income by expenditure method. OR Calculate the value of ‘Sales’…

Accepted Answer

(a) Two precautions to be taken while estimating National Income by Expenditure Method are: - Expenditure on intermediate goods: It should not be included as it will lead to the problem of double counting. - Expenditure on purchase of second-hand goods: It should not be included as it does not add to the flow of goods and services in the current year. OR (b) Value of Sales = (viii) – (iv) + (iii) + (v) + (vi) – (i) = 2,200 – 520 + 120 + 2,900 + 600 – 300 = ₹ 5,000 lakh

S. No.	Particulars	Amount (in ₹ lakh)
(i)	Subsidies	$\displaystyle 300$
(ii)	Operating surplus	$\displaystyle 600$
(iii)	Opening stock	$\displaystyle 120$
(iv)	Closing stock	$\displaystyle 520$
(v)	Intermediate consumption	$\displaystyle 2,900$
(vi)	Consumption of fixed capital	$\displaystyle 600$
(vii)	Profits	$\displaystyle 700$
(viii)	Net Value Added at Factor Cost (NVA$\displaystyle _{FC}$)	$\displaystyle 2,200$

State and explain any two precautions that must be taken while estimating national income by expenditure method.

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