The national spending approach and the factor income approach are equivalent ways of measuring GDP because every dollar spent in the economy is ultimately received as income by someone.

Question

Quizplus · Accepted Answer

Both the national spending approach and the factor income approach take into account all the spending and income in the economy. The national spending approach measures GDP by adding up all the spending on final goods and services, while the factor income approach measures GDP by adding up all the income earned by factors of production (such as wages, rent, and profits). However, every dollar spent in the economy ultimately ends up as income for someone, whether it's wages for workers, profits for businesses, or rent for landlords. Therefore, the two approaches are equivalent ways of measuring GDP.

The National Spending Approach and the Factor Income Approach Are