Question

According to the circular-flow diagram, GDP

a. can be computed as payments firms make to factors of production plus revenues they receive from the sales of goods and services.

b. can be computed as the revenue firms receive from the sales of goods and services minus the payments they make to factors of production.

c. can be computed as either the revenue firms receive from the sales of goods and services or the payments firms make to factors of production.

d. can be computed as the payments firms make to factors of production, but not as revenues they receive from the sales of goods and services.

Answer 1

According to the circular flow-diagram, GDP

Correct answer will be option C. CAN BE COMPUTED AS EITHER THE REVENUE FIRMS RECEIVE FROM THE SALES OF GOODS AND SERVICES OR THE PAYMENTS FIRMS MAKE TO THE FACTORS OF PRODUCTION.

According to the methods of calculating GDP in national income, the national income is calculated either in income method or in expenditure method. Revenue the firms receive from the sale of goods and services is income method. Payment firms make to factors of production is otherwise known as expenditure method. Separately national income can be calculated in both the methods.