Question
Consider the following statements regarding Gross Domestic Product:
Select the correct answer using the code given below:
- It is the value added by all the firms in the economy
- It is the final value of goods and services produced in the economy
- It is the sum of final consumption and investment expenditure by the household, private and government sector and net of exports and imports
- It is the income received by the four factors of production
Select the correct answer using the code given below:
Answer: Option D
Answer: (d)
GDP is the sum of the final value of all goods and services (consumption and capital) produced in the economy or it can also be defined as the value added by all the enterprises/firms in the economy (by value-added method). So (i) & (ii) statements are true.
By expenditure method, GDP = C + I + G + X-M
C + I + G is the expenditure done by the three sectors of the economy on two types of final goods i.e. consumption and capital (investment goods). X-M is the net of exports and imports. So, (iii) statement is also true.
By the Income method, GDP is also equal to the income received by the four factors of production i.e. Profit, Rent, Interest and wages. So, (iv) statement is also true.
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Answer: (d)
GDP is the sum of the final value of all goods and services (consumption and capital) produced in the economy or it can also be defined as the value added by all the enterprises/firms in the economy (by value-added method). So (i) & (ii) statements are true.
By expenditure method, GDP = C + I + G + X-M
C + I + G is the expenditure done by the three sectors of the economy on two types of final goods i.e. consumption and capital (investment goods). X-M is the net of exports and imports. So, (iii) statement is also true.
By the Income method, GDP is also equal to the income received by the four factors of production i.e. Profit, Rent, Interest and wages. So, (iv) statement is also true.
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