To calculate GDP once national income has been computed, we must
A) add indirect business taxes and transfers and subtract profits.
B) add depreciation and subtract indirect business taxes.
C) add depreciation and indirect business taxes and transfer payments and subtract other business income adjustments and net U.S. income earned abroad.
D) add indirect business taxes and transfers and subtract depreciation, other business income adjustments, and net U.S. income earned abroad.

Question

Quizplus · Accepted Answer

To calculate GDP, we need to add four components: consumption by households, investment by businesses, government spending, and net exports. National income, on the other hand, includes only the total amount of income paid to factors of production. In order to move from national income to GDP, we need to add two adjustments: depreciation and indirect business taxes. Additionally, we need to subtract two adjustments: other business income adjustments and net U.S. income earned abroad. Therefore, the correct option is C, which includes all the necessary adjustments.

To Calculate GDP Once National Income Has Been Computed, We