Income and Expenditure Approach to Measuring GDP Income Approach
The income approach combines all the factor payments together to calculate GDP.
GDP= wages + rent + interest + profit + adjustments
Adjustments include depreciation, corporate income tax, undistributed corporate profits, etc.
Expenditure Approach
The expenditure approach combines the purchases of domestic goods taken from the circular flow to calculate GDP.
GDP= C + I + G + (X-IM)
where C= consumption spending by households, I= investment spending by businesses or firms, G= government spending by the government and (X-IM)= net exports by foreign countries.
*All info taken from "Circular Flow" lecture notes, slides 25, 27 and 28.*
Income Approach
The income approach combines all the factor payments together to calculate GDP.
GDP= wages + rent + interest + profit + adjustments
Adjustments include depreciation, corporate income tax, undistributed corporate profits, etc.
Expenditure Approach
The expenditure approach combines the purchases of domestic goods taken from the circular flow to calculate GDP.
GDP= C + I + G + (X-IM)
where C= consumption spending by households, I= investment spending by businesses or firms, G= government spending by the government and (X-IM)= net exports by foreign countries.
*All info taken from "Circular Flow" lecture notes, slides 25, 27 and 28.*