Why are income, output and expenditure studied together in national income accounting?
Answer and explanation
Correct answer: Because they show total economic activity from different viewpoints
In national income accounting, the value of production creates income for factors of production, and that income supports expenditure on final goods and services. Therefore, output, income and expenditure are three perspectives on the same circular flow of economic activity. With proper adjustments, their measured totals should be equal.
Frequently asked questions
What is the correct answer to this question?
Because they show total economic activity from different viewpoints
Why is this the correct answer?
In national income accounting, the value of production creates income for factors of production, and that income supports expenditure on final goods and services. Therefore, output, income and expenditure are three perspectives on the same circular flow of economic activity. With proper adjustments, their measured totals should be equal.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
