From the above information calculate National income by expenditure method.

1758

The correct answer is Option 4: 1758

GDP at MP (by Expenditure Method)≡  C + Ι + G +Change in stock+ X – M

Change in Stock =Closing Stock-Opening Stock= 35 - 30=5

GDP at MP (by Expenditure Method)= 397 + 764 + 919 + 28 - 50 + 5 = 2063

GNP at MP ≡ GDP at MP + Net factor income from abroad =2063-200=1863

NNP at MP ≡ GNP at MP – Depreciation=1863-100=1763

NNP at Factor Cost (National Income)= NNP at MP – Net indirect taxes (Indirect taxes – Subsidies)

=1763 - (45-40)

=1763-5

=1758

NNP at Factor Cost (National Income)=1758

C=the aggregate final consumption expenditure on the goods and services produced by the firm

I= the aggregate  final investment expenditure incurred by other firms on the capital goods produced by firm

G=the aggregate expenditure that the government makes on the final goods and services produced by firms

X= the export revenues

M=Imports Made 

Note: The change in stock has been added separately because the item given in the question is Gross Fixed Capital Formation, not total Gross Capital Formation. In macroeconomics, Gross Fixed Capital Formation includes expenditure only on fixed assets such as machinery, buildings, and equipment. However, total investment expenditure under the expenditure method also includes inventory investment, i.e., change in stock. Therefore, change in stock must be added separately to Gross Fixed Capital Formation to calculate total capital formation correctly.