One Reason the Total Sum of the Income Categories Does

question 27

Multiple Choice

One reason the total sum of the income categories does not equal GDP is that

• A)GDP values goods and services at market prices and the income approach values them at factor cost.
• B)GDP values goods and services at retail prices and the income approach values them at wholesale cost.
• C)taxes are generally larger than subsidies and the depreciation of capital is negligible.
• D)GDP does not include depreciation,which is part of the income categories.
• E)people do not spend all their income,so the value of consumption expenditure is less than the value of wages.

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good changes in response to a change in the price of that good.

Substitute Goods

Products or services that can serve as replacements for each other; when the price of one increases, the demand for the alternative is likely to increase.

Time Available

The total hours or minutes that can be allocated to certain activities or tasks within a given period.

Price-Elastic

Refers to a situation where the demand for a product changes significantly in response to a change in price.