Question

1. GDP under the Expenditures Approach is defined as:

Group of answer choices

Y = C + S + G + M – X

GDP = C + Ig + G + XN

2.

GDP under the Income Approach is defined as:

Group of answer choices

Y = Wages + Rents + Interest + Profits + Statistical Adjustments

Y = National Income + Corporate Profits + Interest + Rents + Statistical Adjustments

Y = Consumption + Savings + Income + Profits + Statistical Adjustments

Y = National Income + Savings + Production + Profits + Statistical Adjustments

GDP = C + Ig + G + M – X

Y = C + S + G + X – M

Y = C + S + G + XN

2.

Answer 1

Answer 1

GDP under the Expenditures Approach is defined as:

Option b) GDP = C + Ig + G + XN

Reason:

GDP = consumption + investment + government expenditure + exports – imports,

where, exports - imports = XN

Answer 2

GDP under the Income Approach is defined as:

Option b) Y = National Income + Corporate Profits + Interest + Rents + Statistical Adjustments

Reason:

The income approach equates the total output of a nation to the total factor income received by residents or citizens of the nation. The main types of factor income are:

• Employee compensation (cost of fringe benefits, including unemployment, health, and retirement benefits);
• Interest received net of interest paid;
• Rental income (mainly for the use of real estate) net of expenses of landlords;
• Royalties paid for the use of intellectual property and extractable natural resources.

All remaining value added generated by firms is called the residual or profit or business cash flow.