Chapter 8, Problem 1P

To determine

Why the flow of gross domestic product during a given interval must be equivalent to the flow of gross domestic income within that same period.

Concept introduction:

The circular flow of goods and services: It is a type of circular flow in which households and firms interact in the markets for goods and services (where households are buyers and firms are sellers) and in the markets for the factors of production (where firms are buyers and households).

Gross domestic product: It is the money value of all final goods and services produced with in the country given an accounting year.

Gross domestic income: It is the total income received by all the factors of production in a state within a given year.