Question

How do we know that calculating GDP by the expenditure approach yields the same answer as calculating GDP by the income approach?

I want the solution not the instructions.

Answer 1

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Solution,

the basic difference between the two methods is expenditure method is the total expenditure on good and services in a domestic country on the other hand income method describe the income earned on good and services in a domestic country.

let describe as an example:-

income method tells about different factors which earned as wages, rent, profit, and interest they back to market and consumer spend the wages, which termed as consumer expenditure in expenditure method, profit and interest have reinvested to earn more the termed as a gross investment.

it describes that the income method describes the earning in the domestic economy whereas the expenditure method tells about the same amount as expenditure in a domestic country.