The income and expenditure approaches to calculating GDP will produce the same result because for every dollars worth of output that is produced a dollars worth of income will be generated as income for the owners of the factors of production used to produce the output.

Question

Quizplus · Accepted Answer

This statement is true because the income approach measures GDP by adding up all the incomes generated by the production of goods and services, such as wages, profits, and rent. The expenditure approach, on the other hand, measures GDP by adding up all the spending on goods and services by households, businesses, and the government. Ultimately, every dollar spent on a good or service becomes income for the producer of that good or service, resulting in the same overall GDP figure regardless of the approach used.

The Income and Expenditure Approaches to Calculating GDP Will Produce