The circular flow model shows that GDP can be calculated by
A) only the expenditure method in which the four components of aggregate expenditure must be measured in the aggregate.
B) only the income method in which the four components of aggregate income must be measured separately.
C) both the expenditure and income methods, even though aggregate expenditure is usually less than aggregate income.
D) both the expenditure and income methods because aggregate expenditure equals aggregate income.

Question

Quizplus · Accepted Answer

The circular flow model shows that GDP can be calculated by both the expenditure and income methods because, in equilibrium, aggregate expenditure equals aggregate income. Therefore, both methods yield the same result.

The Circular Flow Model Shows That GDP Can Be Calculated