Two equivalent ways to view GDP are as the

Question

BlackTom AI · Accepted Answer

Question restatement: Two equivalent ways to view GDP are as the
two common measures of aggregate activity: the total income earned in the economy, or the total expenditure on the economy's output of goods and services.

Option a: "total payments made to all workers in the economy or the total profits of all firms and businesses in the economy". This is misleading because GDP’s income side includes wages, profits, rents, and taxes minus subsidies, not just payments to workers or profits alone. Focusing only on wages or only profits ignores other components and breaks the standard identity that GDP sums all incomes and all expenditures. In addition, GDP is not defined as all payments to workers specifically, so this pairing is inaccurate.

Option b: "total expenditures on all goods produced in the economy or the total income earned from producing all services in the economy". While expenditure on goods is part of the expenditure approach, the phrase excludes expenditures on services and conflates two distinct concepts: expenditure on goods versus income from services. GDP’s expenditure approach covers spending on both goods and services, not just goods, so this option is incomplete and incorrect.

Option c: "total profits of all firms and businesses in the economy or the total consumption of goods and services by all households in the economy". Total profits alone is not GDP, since GDP includes all incomes (wages, rents, profits, taxes, etc.), not just profits. Also, GDP is not defined as consumption alone; consumption is a major component of expenditure, but GDP also includes investments, government spending, and net exports. This option narrows GDP to inappropriate components.

Option d: "total income of everyone in the economy or the total expenditure on the economy's output of goods and services". This matches the textbook GDP identity: GDP can be viewed as the total national income (sum of wages, rents, profits, etc.) or as the total expenditure on the economy’s output (consumption, investment, government spending, and net exports). It correctly pairs the income approach with the expenditure approach, covering both sides of the GDP accounting identity.

BU.220.610.51.FA25 M8 Final Comprehensive Exam - Multiple Choice Questions- Requires Respondus LockDown Browser

Two equivalent ways to view GDP are as the

View Explanation

Log in for full answers

Similar Questions

A Texas household receives a Social Security check for $1500, which it uses to purchase a $40 pair of shoes made in Thailand by a Thai firm, a $1240 television made by a Korean firm in Korea, and $220 on groceries from a local store. As a result, U.S. GDP

U.S. GDP excludes the production of most illegal goods.

GDP understates the amount of economic production in the United States because it excludes

GDP tends to underestimate the productive activity in the economy because it excludes the value of output from

Australian Gross Domestic Product (GDP) would exclude which of the following?[Fill in the blank]

An Italian restaurant purchases an orange for $2 to make fresh orange juice, which it then sells for $5. Meanwhile, Alison buys an orange for $1 at wholesale for her grocery store and resells it to a customer for $3. What is the total contribution of these two transactions to GDP?[Fill in the blank]

"Suppose a new computer is invented that costs one-quarter of existing computers and performs as well. Now, when GDP is calculated, production of the same number of computers creates only one-quarter as much dollar output - GDP falls!"[Fill in the blank]

In a country with unusually high tax rates, one might expect that ________.

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler