Explain the three ways GDP can be measured. What will be an ...

[strangeaffliction]

Explain the three ways GDP can be measured.
 
  What will be an ideal response?

Question 2

Which of the following about capital income is not correct?
 
  A) It refers to a firm's revenue.
  B) It is also called profit income.
  C) It goes to the firms.
  D) It accounts for less than 35 of income in advanced countries.

[mcabuhat]

Answer to Question 1

GDP can be measured three ways. First, GDP represents the market value of the final goods and services produced in the economy during a given period. This would be obtained by adding C, I, G, and NX. Second, GDP is the sum of the value added by firms. The value added for a firm equals the value of the production (at that stage of the production process) minus the value of the intermediate goods (excluding labor services). The final value of aggregate output can be calculated by either summing the value of all final goods and services OR by summing the value added of all goods and services at each stage of production. And finally, GDP is also the sum of all incomes earned in a given period.

Answer to Question 2

A