GDP

GDP

by Kaleb Koepp -
Number of replies: 1

So there are two different ways to evaluate the worth of GDP, right? How do those two ways come to the same conclusion? Between the Expenditure Approach and the Resource Cost-Income Approach, there are a number of differences in the components that make up each method. In the Expenditure Approach, you add up the consumption, investment spending, government spending, and the net exports. In the Resource Cost-Income Approach, you add up the national Income, indirect business taxes, depreciation, and the net foreigners' income. Those are all different items. Is the national income supposedly equal to the positive factors of the Expenditure Approach? I probably one-hundred percent should have asked this in class, but I take a while to process things. 

In reply to Kaleb Koepp

Re: GDP

by Danny Weaver -
Let's boil it down to an absurd level. Imagine we are measuring the economy of Koeppia-Weaverstan, a new nation of two brilliant economists and no one else. Imagine I pay you to mow my lawn. On the expenditure side of measuring GDP, the $20 I give you is found. On the income side, that same $20 is reflected in your income. The accounting is different, but they are measuring the same thing - the two approaches should be equal.