Question

Why must total income and total outcome always be equal?

Answer 1

Solution-

Total outcome means the cost of production. In short Spending. Total Income And Total Outcome must be equal because, ‘Spending’ is the act of buying a good or service. The amount spent goes to somebody else as ‘income’, which is the amount received when a good or service is sold. Since every act of spending results in income for somebody else, total spending for the economy as a whole equals total income. This is true by definition and is a basic building block in macroeconomics.

By total spending is meant all the spending on goods and services that occurs within a certain period of time, such as a year. Similarly, total income is all the income received from the sale of goods and services within the same time frame. Spending and the receipt of income occur every time a good or service is bought and sold.

In Short, total spending must equal total income over any given time period, because if I spend a dollar, someone else must receive it as a dollar of income. So, Total income and Total outcome always be equal.