The national income accounts measure activity in three ways, each of which gives
ID: 1135440 • Letter: T
Question
The national income accounts measure activity in three ways, each of which gives the same value for current economic activity. The income approach measures economic activity by adding all income recieved by producers of output = including wages recieved by workers and profits recieved by owners of firms. The measure by this approach is related to others as: Total (A.Sales revenues of all producers. B. Value added by all producers. C. profits of all producers)= total income= total (A.Spending by consumers B.Amount spent by all ultimate users of output C.sales plus the market value of unsold goods of all producers)
Explanation / Answer
Total (B) Value added by all producers = Total income = Total (B) amount spent by all ultimate users of output
[Under Value-added method, National income (GDP) = Total Value added by all producers
Under Income method, National income (GDP) = Total income
Under Expenditure method, National income (GDP) = Total amount spent by all ultimate users of output = Consumption + Investment + Government spending + Net exports]