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Expenditure and income approaches

It is important to keep in mind that this section details the computational method for calculating total output in the economy using income. Income is the other side of the national income accounting process. For a country (or household) to be efficient, it must be able to detail the sources of its income. The point of the national income accounting system is to determine efficiency of a country, much like one would do in one’s own household. Economists seek data about income as well as expenditure; ideally, the two should be in balance – that is, they should be the same amount. When income and expenditure are balanced, the country or the household is said to have a balanced budget.

Watch these Khan Academy videos where different models of calculating GDP are explained. Then share your thoughts with your classmates by writing a blog post. Remember to tag (WordPress) or label (Blogger) your blog post using the course tag: maec101 Do these models make sense? Are you more confused than before? Sharing with classmates can be a valuable way to clear up your own thoughts and get help from other learners.