The total expenditure on goods and services in a country must be the same as the total income earned from selling goods and services because:

Question

Quizplus · Accepted Answer

This is because when one sector (consumers, businesses, government) spends money on goods and services produced by another sector, this creates income for the latter sector. In turn, that sector can then spend their income on goods and services produced by the other sector, leading to a circular flow of income and expenditure. Therefore, the total expenditure on goods and services must be equal to the total income earned from selling goods and services.

The Total Expenditure on Goods and Services in a Country