The Income Approach to Calculating GDP

question 33

Multiple Choice

The income approach to calculating GDP:

• A) is more accurate than using the expenditure approach.
• B) is less accurate than using the expenditure approach.
• C) will generate the same answer as using the expenditure approach.
• D) is simpler to calculate than the expenditure approach.

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Definitions:

Capital

Financial assets or the financial value of assets, such as cash and securities, owned by a business or individual, used for creating wealth or to engage in further production.

Revenue

The total amount of money earned by a business from its normal business operations, before any expenses are subtracted.

Credit Balance

An accounting situation where the sum of credits in an account exceeds the sum of debits, often seen in liability and revenue accounts.

Income Summary

An account used in the closing process that aggregates all revenues and expenses to determine the overall profit or loss.