Q. Please explain the formula of Government Final Consumption Expenditure (GFCE).
Dear Student,
Government final consumption expenditure is the net difference between the government expenditure and government receipts. government final consumption expenditure = Intermediate consumption of government + COE paid by government+ Direct purchases from abroad for embassies - sale of goods and services produced by general government .
Here,
(i) Intermediate consumption of the government : Intermediate consumption refers to monetary value of goods and services that are used up by government in production . It is the expenditure by the government , so it is included in government final consumption expenditure.
(ii) COE paid by government : COE refers to compensation of employees. When government pay compensation to employees , it is the expenditure by the government.Thus included in the government final consumption expenditure.
(iii)Direct purchases from abroad : When government purchases anything from abroad , it will be considered as expenditure by the government .
(iv) sale of goods and services produced by general government : Sale of goods and services produces revenue and it is receipts for the government . So it is deducted from the government final consumption expenditure.
Hope this information will clear your doubts .
If you have any more doubts just ask on the forum and our experts will try to help you out as soon as possible.
Regards
Government final consumption expenditure is the net difference between the government expenditure and government receipts. government final consumption expenditure = Intermediate consumption of government + COE paid by government+ Direct purchases from abroad for embassies - sale of goods and services produced by general government .
Here,
(i) Intermediate consumption of the government : Intermediate consumption refers to monetary value of goods and services that are used up by government in production . It is the expenditure by the government , so it is included in government final consumption expenditure.
(ii) COE paid by government : COE refers to compensation of employees. When government pay compensation to employees , it is the expenditure by the government.Thus included in the government final consumption expenditure.
(iii)Direct purchases from abroad : When government purchases anything from abroad , it will be considered as expenditure by the government .
(iv) sale of goods and services produced by general government : Sale of goods and services produces revenue and it is receipts for the government . So it is deducted from the government final consumption expenditure.
Hope this information will clear your doubts .
If you have any more doubts just ask on the forum and our experts will try to help you out as soon as possible.
Regards