The income approach to measuring GDP is to add up all the income earned by households and firms in a

The income approach to measuring GDP is to add up all the income earned by households and firms in a

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The  income approach  to measuring GDP is to add up all the income earned by households and  firms in a single year. The rationale behind the income approach is that total expenditures on final  goods and services are eventually received by households and firms in the form of  wage, profit,  rent , and  interest  income. Therefore, by adding together wage, profit, rent, and interest income, one  should obtain the same value of GDP as is obtained using the expenditure approach.  There are two types of expenditures, however, that are  included  in the expenditure approach to GDP  measurement but  do not  provide households or firms with any form of income:  depreciation  expenditures  and  indirect business taxes . Depreciation expenditures, made to replace existing 
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This note was uploaded on 11/18/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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