The equality between GDP and GDI in an economy implies that the income generated by final goods and services is equal to:
A) expenditures on intermediate goods and services.
B) gross private domestic investment.
C) the total value of final goods and services produced.
D) total wages and other employee compensation.

Question

Quizplus · Accepted Answer

GDP (Gross Domestic Product) and GDI (Gross Domestic Income) are two measures of the economic activity of a country. GDP is calculated by adding up the value of final goods and services produced in an economy during a given period, while GDI is calculated by adding up all the income earned by households and businesses during that same period.

If GDP and GDI are equal in an economy, it means that the total income generated by the production of final goods and services (GDP) is equal to the total income earned by households and businesses (GDI). Therefore, the correct answer is C, the total value of final goods and services produced.

Expenditures on intermediate goods and services (A) are already included in GDP as part of the value of final goods and services. Gross private domestic investment (B) represents the investment made in capital goods, which can contribute to the production of final goods and services, but it does not necessarily equal the total value of those goods and services. Total wages and other employee compensation (D) are only a part of GDI and therefore do not represent the entire value of final goods and services produced.

The Equality Between GDP and GDI in an Economy Implies