Expenditure Method

METHODS OF CALCULATING NI
EXPENDITURE INCOME PRODUCT

METHOD METHOD METHOD
Expenditure Method
 In this method, national income is obtained by summing

all expenditure on final goods and services produced in
the economy.
Melalui kaedah perbelanjaan, pendapatan negara
diperolehi dengan menjumlahkan semua perbelanjaan
ke atas barangan dan perkhidmatan akhir yang
dihasilkan dalam ekonomi.
Consumption (C)
Government Spending (G)
Net Exports (X – M)
Expenditures are made up by four
economic sectors such as:
Investment (I)
 This component includes expenditure / spending by all
households in the economy to purchase goods and
services required.
Komponen ini meliputi perbelanjaan oleh semua isi rumah dalam
ekonomi untuk membeli barang dan perkhidmatan yang diperlukan.
 Household spending includes spending on cars,
furniture, television (durable goods); food, clothing,
gasoline (non-durable goods); and expenses for
services (education and health).
Perbelanjaan isi rumah ini termasuk perbelanjaan ke atas kereta,
perabot, televisyen (barang tahan lama); makanan, pakaian, petrol
(barang tidak tahan lama); dan perbelanjaan untuk perkhidmatan
(pendidikan dan kesihatan).
 Investment firm refers to expenses for capital
expenditures to increase production of goods and
services in the future.
Pelaburan merujuk kepada perbelanjaan firma untuk membeli
barang modal yang dapat meningkatkan pengeluaran barang dan
perkhidmatan di masa hadapan.
 For example, construction of office buildings and

factories, purchase of machinery and equipment as well
as tools for conducting business and changes in
inventory.
Sebagai contoh, pembinaan bangunan pejabat dan klang,
pembelian mesin-mesin dan kelengkapan serta alat-alat untuk
mengendalikan perniagaan dan perubahan inventori.
3. Government Spending (G)
 Government spending is the expenditures made by

federal, state and local government for final goods and
services.
Perbelanjaan kerajaan adalah perbelanjaan yang dibuat
oleh persekutuan, negeri dan kerajaan tempatan untuk
barangan dan perkhidmatan yang dihasilkan.
 The purchase of government goods and services
includes the cost of providing national defence,
construction of new building such as schools and
hospitals, and the payment of salaries to public servants.
Pembelian barangan dan perkhidmatan kerajaan
termasuk kos menyediakan pertahanan negara,
pembinaan bangunan baru seperti sekolah dan hospital,
dan pembayaran gaji kepada kakitangan awam.
 Transfer payment is not included in government
expenditure because it does not represent the purchase
of goods and services. Rather it is a transfer of income
from the government to individuals or households.
Bayaran pindahan tidak termasuk di dalam perbelanjaan
kerajaan kerana ia tidak mewakili pembelian barangan
dan perkhidmatan. Sebaliknya, ia adalah pemindahan
pendapatan daripada kerajaan kepada individu atau isi
rumah.
4. Net Exports
 Net export is the difference between exports (sales to

foreigners of Malaysia – produced goods and services)
and imports (Malaysia purchases of goods and services
from abroad)
Eksport bersih ialah perbezaan di antara eksport (jualan
kepada orang asing - barangan dan perkhidmatan yang
dikeluarkan oleh Malaysia) dan import (pembelian
barangan dan perkhidmatan dari luar negara oleh
Malaysia).
 In other words, we can say that net exports are the
difference between the value of exports and the value of
imports.
Dalam erti kata lain, eksport bersih adalah perbezaan
antara nilai eksport dan nilai import.
Net Exports = Exports (X) – Imports (M)
 In the expenditure method, Gross Domestic Product

(GDP) is calculated by adding up all the four items of
expenditure as follows:
GDP at market price = C + I + G + (X-M)

Disposable personal income = Personal income –
Personal income tax
Personal income = National Income + Transfer

payments + Interest on consumer loans + Interest on
government loans – Undistributed Company Profit
(Retained earnings) - Corporate income taxes - Social
security contributions - EPF
National Income = GNP (FC) – Depreciation
GNP (FC) = GNP (MP) - Indirect tax +

Subsidy
GNP (MP) = GDP (MP) + Net factor Formulas in calculating

Income abroad the national income using
Expenditure method
GDP (MP) = C + I + G + (X – M)
Items RM million RM million
Household expenditure (C) (+) 2500
Government expenditure (G) (+) 350
Gross Investment (I) (+) 350
Change in stocks (I) (+) 100
Exports of goods & services (X) 600
Imports of goods & services (M) 500
Net Export (X-M) (+) 100
Gross Domestic Product at market price 3,400
Factor income received from abroad 800
Factor income paid abroad 700
Net factor income payments from abroad (+) 100
(Factor income received – factor income paid)
Gross National Product at market price 3,500
Items RM Million RM Million
Gross National Product at market price 3,500
Indirect taxes (-) 300
Subsidies (+) 150
Gross National Product at factor cost 3,350
Depreciation (-) 50
National Income 3,300
(Net National Product at factor cost)
Items RM (million)
Exports 500
Personal consumption expenditure 1,400
Changes in stock -40
Indirect tax 30
Government expenditure 990
Investment 1,000
Personal income tax 80
Subsidies 50
Imports 400
Factors income paid abroad 80
Depreciation 40
Factors income received from abroad 90
Calculate the:
a) Gross Domestic Product at market price

b) Gross Domestic Product at factor cost
c) Gross National Product at factor cost
d) National Income / Net National Product at factor cost

Expenditure Method

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METHODS OF CALCULATING NI

EXPENDITURE INCOME PRODUCT

 In this method, national income is obtained by summing

 For example, construction of office buildings and

 Government spending is the expenditures made by

 Net export is the difference between exports (sales to

Net Exports = Exports (X) – Imports (M)

 In the expenditure method, Gross Domestic Product

GDP at market price = C + I + G + (X-M)

Personal income = National Income + Transfer

National Income = GNP (FC) – Depreciation

GNP (FC) = GNP (MP) - Indirect tax +

GNP (MP) = GDP (MP) + Net factor Formulas in calculating

a) Gross Domestic Product at market price

c) Gross National Product at factor cost

d) National Income / Net National Product at factor cost

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