Question

List the three methods of measuring Gross Domestic Product of an economy.

Hint:

All three methods (Production, Expenditure, and Income) should ideally result in the same GDP value, but they approach the calculation from different perspectives.

Answer 1

Step 1: Identify the three methods of measuring GDP.
The three methods of measuring Gross Domestic Product (GDP) of an economy are: 1. Production Method: This method calculates GDP by adding up the value of goods and services produced within the economy. It is also known as the value-added method, where the value added at each stage of production is considered. 2. Expenditure Method: This method measures GDP by summing up all the expenditures made in the economy, including consumption, investment, government spending, and net exports (exports minus imports). 3. Income Method: This method calculates GDP by adding up all the incomes earned by individuals and firms in the economy, including wages, profits, rents, and interest.