Why is GDP calculated in both the expenditure approach and the income approach?
GDP = Gross Domestic Product, the dollar value of all final goods and services produced with a country's borders in a given year.
Answer:
The income and expenditure approach to GDP come up with the same number.
Expenditure Approach:
GDP = consumption + investment + (government spending) + (exports − imports)
Income Approach:
GDP = Compensation of employees + Gross operating surplus + Gross mixed income + Taxes less subsidies on production and imports
As I said, both methods will give you the same answer for GDP. For the economy as a whole, income must equal expenditure. If you pay someone $1,000 to paint your house, then they have received $1,000 to paint your house. In national income accounting, it comes as simply “balancing the books.” You add up and compare both sides to make sure you are not missing anything--making adjustments as needed for income earned by foreigners in the US, indirect business taxes, capital consumption allowances, and statistical discrepancies.
It is NOT to “calculate a net gain.”
the expenditure approach and income appraoch are needed so that you can calculate a net gain..
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Answer:
The income and expenditure approach to GDP come up with the same number.
Expenditure Approach:
GDP = consumption + investment + (government spending) + (exports − imports)
Income Approach:
GDP = Compensation of employees + Gross operating surplus + Gross mixed income + Taxes less subsidies on production and imports
As I said, both methods will give you the same answer for GDP. For the economy as a whole, income must equal expenditure. If you pay someone $1,000 to paint your house, then they have received $1,000 to paint your house. In national income accounting, it comes as simply “balancing the books.” You add up and compare both sides to make sure you are not missing anything--making adjustments as needed for income earned by foreigners in the US, indirect business taxes, capital consumption allowances, and statistical discrepancies.
It is NOT to “calculate a net gain.”
the expenditure approach and income appraoch are needed so that you can calculate a net gain..
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