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Why is it that measuring a nation's expenditure should yield the same value as measuring a nation's income?
Measuring a nation's expenditure should yield the same value as measuring its income due to the circular flow of economic activity. In an economy, every dollar spent on goods and services becomes income for someone else—producers, workers, or service providers. This relationship means that total expenditure in the economy reflects total income generated, making the two measures equal when accounting for all transactions. Thus, in theory, GDP calculated by the expenditure approach and the income approach should result in the same figure.
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When calculated correctly the income approach and the expenditure approach should be?
When calculated correctly, the income approach and the expenditure approach to measuring a country's gross domestic product (GDP) should yield the same result. The income approach sums all incomes earned in the production of goods and services, while the expenditure approach totals all expenditures made on final goods and services. This equivalence is based on the principle that all income generated from production ultimately translates into spending in the economy. Discrepancies may arise in practice due to measurement errors or unreported economic activities.
What are the examples of Fiscal adequacy?
the source of revenue should be sufficient to meet the demands of public expenditure.. ---15---
What percentage of income should be spent on clothing?
About 4% of your net annual income.
How is Loss of Income Insurance calculated?
I don't know how insurance calculate it, i think they should go after gross income instead of net income
Decreasing defence expenditure and increasing social expenditure is the need of the hour?
The budges estimation for Indian defence surges as the year goes by. It is estimated to be around Rs. 11trillion for the current fiscal year. Both the defence expenditure as well social expenditure are necessary. They should be balanced. None can be omitted or concentrated alone. And this can be brought about only by maintaining bilateral and cordial relations with the neighbouring countries. It should start from national level of peace and nuclear disarmament treaty with neighboring countries. This would gradually give some relief towards defence expenditure by the Government. And also gives time to plan on the state of the art infrastruture and world class practices for the benefit and welfare of the society. And as anticipated we would be one among the elite team of Developed nations. This doesnt mean that we need to concentrate less on defence expenditure. It is must to invest more money in Defence R&D. To b equally competent, we have to display a sample of our power. Otherwise things may change, treaty will just remain in papers. Basic fact is we are humans. We have the tendency to pull others legs. My point is both are essential. Defence expenses has to be gradually brought down and social welfare investment for the society has to be increased and implemented.
Does an expenditure that is classified as a deduction from adjusted gross income produce the same tax benefits as an expenditure that is classified as a deductions for adjusted gross income?
You should review your Q...there is no difference in what your asking.
What are ways of measuring the economy?
1) Measure all of the income in an economy (wages, taxes, transfers, etc.). 2) Measure the value-added on goods (i.e.) the change in value when wood is turned into a chair). 3) Measure all expenditure (consumption, investment, government spending, etc.). All three of these methods are used in income accounting and should always end up with the same result. This is because all income in an economy must be expended and the value of the expenditure and income is equivalent to the value of production (value-added to goods).
What is a good budget?
A budget should be called a good one when it effectively strikes a balance between projected income and possible expenditure.
What is GD PI?
If the question refers to GDP(I), it is a measure of national output (Gross Domestic Product). There are basically three ways of measuring it - Output, Expenditure and Income - the last of which gives GDP(I). In theory, all three measures should agree but in practise they don't. If the question did not refer to GDP(I), then apologies.
Why depreciation is an application of accruals concept?
The accruals concept states that the income for the year must be matched against the expenditure. Depreciation is the reduction in value of an asset with the passage of time, due to particular wear and tear.(Answer to the question)- Depreciating the asset is an expenditure for the business. This should be matched with the income it generates (say for example - delivery vehicles used for the transport of goods) to get a true and fair profit in the Income Statement.
What does the gross domestic product measure?
* Posted: Sun, May 18 2008. 11:00 PM IST Ask Mint | Expenditure and income methods: two other ways of measuring GDPWhat goes out of your pocket as expenditure for using the laundry service ultimately becomes the income of the person providing that serviceReal Simple | Shailaja & Manoj K SinghOur economy works much like the game of passing the parcel, a favourite party game of children in which a gift wrapped in covers passes through different hands to the tune of music. In our economy also, money passes from one hand to another just like a parcel to the tune of demand and supply. So, the next time you take out your wallet, just keep in mind that you are playing a game of penny. This game can continue only if one person passes his penny to the next person. What goes out of your pocket as expenditure for using the laundry service ultimately becomes the income of the person providing that service. In this manner, the game of penny leads to the growth of gross domestic product or GDP in our economy.Johnny: Last week, you had told me that in addition to the output method we can also measure GDP growth by using the income or expenditure methods. I hope you will now take our discussion further.Jinny: Output of goods and services that have value in terms of money results in income for the producer and expenditure for the consumer.So, instead of measuring the value of output, we can also measure GDP by measuring either the income or expenditure of people.The figures arrived at by any of the three methods must be the same. But in reality, the figures may vary due to counting errors and omissions.Johnny: Yes, Jinny, errors and omissions are bound to occur when you are counting the income and expenditure of all the people in the country. But tell me how these income and expenditure methods work. Its a game of penny-money passes from one hand to another, to the tune of demand and supplyJinny: Let's talk about the expenditure method first. For measuring total expenditure, we divide the final users of goods and services into four groups: households, firms, government and foreign consumers.The expenditure method works on the presumption that whatever goods and services a country is generating ultimately get consumed by these four groups. So if you add up their total expenditure on various goods and services, you can very well know the value of GDP. Households spend their money in private consumption on a variety of goods and services such as foods, clothes, car, toothpaste, haircuts, laundry service and many other things.Likewise, our government also spends money on a variety of goods and services. It makes hospitals, builds schools and dams, and does many other things. Similarly, firms spend their money in investments for purchasing new machines, factories, office buildings, things that increase their productive capacity.In addition, unsold goods in the inventory of firms are also treated as their expenditure. This ensures that unsold goods are not left uncounted in the expenditure method.Finally, we count the money spent by foreign consumers on the goods and services produced within our country. We do this by calculating the value of net exports (by subtracting the value of imports from the value of exports of goods and services).Once we have the final figures of all the items-private consumption, firms' investments, government spending and net exports-we can add them to arrive at the final value of GDP through the expenditure method.Johnny: How do we use the income method to calculate GDP?Jinny: For calculating GDP by the income method, we can broadly divide our economy into two groups: those who contribute their labour and those who contribute their capital. The cost of production of goods and services leads to income for both these two groups of people. A mechanic engaged in the production of cars earns his income in the form of a monthly salary.The shareholders of the car company earn money in the form of dividends. The lenders of the company take away interest and the owners of the land take away lease rent.One activity can generate income for so many different people. We have numerous incorporated and unincorporated firms, enterprises and individuals in our country that are engaged in the production of a variety of goods and services. If we add the income of all the firms and individuals, we arrive at the value of GDP at factor cost. This value of GDP at factor cost does not include the taxes and subsidies on final goods and services paid by the final consumer. It only shows the production cost of goods and services.So, this figure will not match with the figure of GDP calculated by us through the expenditure method, which takes into account the actual price paid by the consumer after taxes and subsidies.In order to remove this discrepancy, we add the value of taxes and subtract subsidies from the value of GDP at factor cost. This will give you the final figure of the value of GDP calculated through the income method. This should be equal to the value of GDP calculated through the expenditure method.If it does, then you have completed a feat that is as difficult as counting the number of hair on your head.Johnny: That's true, Jinny. The next time I go for a haircut, I will challenge my barber to take stock of the number of hair on my head.Shailaja and Manoj K. Singh have important day jobs with an important bank. But Jinny and Johnny have plenty of time for your suggestions and ideas for their weekly chat. You can write to both of them at realsimple@livemint.comMaking sense of GDPWhat: Measurement of GDP requires collection of data from a variety of sources.How: Expenditure method uses expenditure figures of consumers whereas income method uses income figures of producers for measuring GDP.Who: The task of measuring GDP is done by the Central Statistical Organization in our country.
What is econometric research?
Econometrics research is basically research that employs statistical techniques and economic theory to quantify, analyze and test relationships between two or more variables. Much of the time regression analysis is used to perform the research. Say you have a data set consisting of 100 observations with two variables... Income and "Weekly Family Food Expenditure"... Economic theory would tell you that as income increases the weekly food expenditure should increases as well, but often times that's not enough... you want to confirm that and then tell by how much and perhaps you want to know if the increase is constant at all levels. You may even want to predict what someone's food expenditure will be given their weekly income. Through statistical and econometric techniques you'll be able to construct a model and determine how accurate it is with a certain level of confidence. You can use that model to predict food expenditures at different levels of income, measure if the increase in food expenditure that you suppose to occur with increased income is constant at all levels, determine how much of the food expenditure is described by income or if there are other variables that if added to the model might help to explain it better and much more. Kevin
How much life insurance a man needs?
Your life insurance need should be 12 times of your present annual income. It has been estimated that when you retire,your own income is off but you cann't slash your expenditure. If you arrange life coverage on above calculation, you can have same income from the lumpsum invested in term deposits at interest projection of 8%,which you will be getting from life insurance company.
Factors to consider when preparing an income and expenditure budget?
*family income- family with a lower income should consider carefully how much they should spent. *family size and composition *social status *knowledge and skills *likes and dislikes of the family *current food prices *food production at home _________________ thank you_________________
What laboratory equipment should I use for measuring volume?
A measuring cylinder
What should you use for measuring a car?
you should use meters
What is the ability to pay principle of taxation?
Benefit taxation can relate only to the financing of public services and not to the redistributive function of the tax transfer process.Under this approach, the tax problem is viewed by itself, independent of the expenditure determination.Horizontal EquityTaxationaccording to ability to pay calls for people with equal capacity to pay the sameVertical EquityFor people with greater ability to pay, they pay more. Person A , whose income is higher , should pay more than B. Implementation of either rule requires a quantitative measure of ability to pay . Ideally this measure is reflected in income, expenditure and wealth.
