In an economy measuring (1) total value added (2)total spending on final goods and (3)total factor earning gives the result that ?
Correct answer: B. 3=2=1
- A. 3>2>1
- B. 3=2=1
- C. 3<2<1
- D. any measure can be larger or smaller than any other
Explanation
Total value added, expenditure on final goods, and factor income are three methods of measuring national income. In principle, each gives the same total, expressed respectively as production, expenditure and income.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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