Four factors of monetary expenditure:
The various components of final expenditure considered in national income can be divided into four parts. They are:
(A) Consumption expenditure:
- The expenditure incurred by citizens, families and firms on consumable goods is called consumption expenditure.
- It includes expenditure done on durable goods like TV, scooter, car, etc., perishable goods like food grains, fruits, vegetables, services like education, medical treatment, transportation and communication, etc.
(B) Investment expenditure:
It is the expenditure incurred on building a factory, plant, machinery and necessary goods, equipment for running a business or profession, etc.
(C) Government expenditure:
- It refers to the expenditure incurred by government on various administrative services like defence, law and order, education, etc.
- Consumption expenditure, investment expenditure, administrative expenditure, etc. are different types of expenditures done by central government, state government and local bodies.
(D) Net export expenditure i.e. Export minus Import:
- It refers to the difference between exports and.imports of a country during a period of one year.
- The expenditure done on importing foreign goods by citizens of country is the expenditure of the country. Similarly, our export is expenditure incurred by foreign citizens on domestic goods.
- Therefore, the difference between these two is the net export which is included in the national income.
