To overcome the problem of double counting under the expenditure approach,
To overcome the problem of double counting under the expenditure approach,
- A. spending on intermediate goods and inputs are considered
- B. valued added method is used
- C. proper accounting standards must be used
- D. only spending on final goods are considered
Correct Answer: D. only spending on final goods are considered
Explanation
To overcome the problem of double counting under the expenditure approach, only spending on final goods are considered.
The expenditure approach to calculating national income measures the total spending on goods and services in an economy. However, this can lead to double counting, as the same good or service can be counted multiple times if it is used in the production of other goods and services.
To avoid double counting, only spending on final goods is considered when using the expenditure approach. Final goods are goods and services that are not used to produce other goods and services. Intermediate goods, on the other hand, are goods and services that are used to produce other goods and services.
By only considering spending on final goods, the problem of double counting is avoided. This is because final goods are not used to produce other goods and services, so they are not counted multiple times.