The advantages and disadvantages of income approach, expenditure approach and output approach of calculating national income?


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Neal Widdows Profile
Neal Widdows answered
Income approach is one of the major ways to calculate both real estate and business values, which makes it useful in terms of calculating national income in that it can ascertain the total profits made by businesses and extrapolate from there. However, depreciation is not initially factored into the equation, leading to some degree of estimation. The expenditure approach measures the amount of money used in an economy to make purchases, and therefore to determine the national income in terms of goods produced and money spent buying those goods. However, whilst the expenditure method is used to calculate labour, it is only able to measure paid labour; things such as charity work would not show up, and can therefore skew the figures. Finally, the product approach is used to measure the amount of product produced by an economy, but is vulnerable to miscalculation due to service industries or industries that do not create an actual, physical product.
Amanda Wells Profile
Amanda Wells answered
They all have advantages and disadvantages. You can find a very clear overview of each approach and its strengths and limitationshere. To find similar articles, you can put the key words 'income expenditure output approach advantages' in a search engine - this will take you to a choice of links including articles and definitions, which should give you all the material you need.

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