Total output equals total income

Question

Quizplus · Accepted Answer

This is a fundamental principle of macroeconomics that assumes that every dollar of output produced in an economy will generate exactly one dollar of income. This is because all the inputs that go into producing output (e.g. labor, capital, raw materials) are paid for, and the total payment for these inputs represents the total income earned by the factors of production that were involved in producing the output. Therefore, total output equals total income, regardless of whether an economy is in equilibrium or not.

Total Output Equals Total Income