Question

Suppose total spending in an economy is $20.3 billion. What is the total income? Briefly explain your answer.

Answer 1

As per national income identity,

Total output in the economy = total income level in the economy = total spending in the economy.

which means, the national income from output method is equal to national income from income method is equal to national income from expenditure method.

This is because, what an economy produces will be consumed by the consumers. So, consumers spend on the purchase of goods and services produced in the economy. The expenditure by the individuals become the income of other individuals in the economy.

Hence, the total income will be $20.3 bllion since the total spending in the economy is also $20.3 billion.