What is the income approach to measuring GDP?
What will be an ideal response?
The income approach measures GDP by focusing on aggregate income. This approach sums all the incomes paid to households by firms for the factors of production they hire. The National Income and Product Accounts divide income into five categories: compensation of employees; net interest; rental income; corporate profits; and proprietors' income. Adding these income components does not quite equal GDP, because it values the output at factor cost rather than the market price and omits depreciation. So, further adjustments must be made to calculate GDP: Indirect taxes and depreciation must be added and subsidies subtracted.
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The above figure shows the market for buckets of golf balls at the driving range. A new leisure time tax is placed on suppliers in this market, shifting the supply curve from S0 to S1. The amount of this tax is ________ per bucket of golf balls
A) $4 B) $2 C) $2.50 D) $1 E) $3
As a result of the superb economics essay that you wrote during this quarter, you won the Adam Smith prize of $100. The receipt of these funds would be an example of
A) the substitution effect being stronger than the income effect. B) the income effect being stronger than the substitution effect. C) a pure income effect. D) a pure substitution effect.