Two equivalent ways to view GDP are as the

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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

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