Krugman's Economics For The Ap® Course
Krugman's Economics For The Ap® Course
3rd Edition
ISBN: 9781319113278
Author: David Anderson, Margaret Ray
Publisher: Worth Publishers
Question
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Chapter 10, Problem 1CYU
To determine

The question requires us to explain the reason for the same result from three methods of calculating the GDP.

Expert Solution & Answer
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Explanation of Solution

GDP is the measurement of all final goods and services produced in an economy in a financial year. There are three methods to calculate GDP:

  • Income method
  • Value-added approach
  • Expenditure method

These methods produce the same estimates of GDP because, in an economy as a whole, total spending on goods and services must equal the total income paid by firms in the factor market.

i.e., Total income = Total spending.

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