Question

Which of the following correctly describes GDP using the income approach?
A) GDP = Consumption + Gross Investment + Net Exports + Government Purchases
B) GDP = Wages + Rents + Interest + Profits and Losses + National Income
C) GDP = Wages + Rents + Interest + Profits and Losses
D) GDP = National Income + Indirect Business Taxes + Depreciation + Net Foreign Factor Income

Answer 1

Answer:

The correct answer is D) GDP = National Income + Indirect Business Taxes + Depreciation + Net Foreign Factor Income.

Explanation:

The GDP by the income approach is the sum of the Compensation of Employees or payment to workers; Gross Operating Surplus or remuneration to capital (to capital owners); Mixed Income or compensation that does not differentiate the payment to the worker and the capital (for example, self-employed workers); and, taxes less subsidies on production and imports or Net Taxes on products that correspond to the Government.