Which Approach to Calculating GDP Would Be Best to Compare

question 45

Multiple Choice

Which approach to calculating GDP would be best to compare consumer activity versus government purchases?

• A) The expenditure approach
• B) The income approach
• C) The value-added approach
• D) Any of these measurements will allow that comparison equally well.

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Definitions:

Marginal Social Benefit

The supplementary gain for society derived from the consumption of one extra unit of a good or service.

Marginal Social Cost

The cost to society of producing an additional unit of a good or service, including both private costs and any externalities.

Marginal Social Benefit

The additional gain to society as a whole from an additional unit of a good or service.

Emissions Tax

A tax imposed on the emission of pollutants, aimed at reducing the environmental externality costs of these emissions.