According to the circular-flow diagram, GDP can be computed as payments firms ma
ID: 1146654 • Letter: A
Question
According to the circular-flow diagram, GDP
can be computed as payments firms make to factors of production plus revenues they receive from the sales of goods and services.
can be computed as the revenue firms receive from the sales of goods and services minus the payments they make to factors of production.
can be computed as either the revenue firms receive from the sales of goods and services or the payments firms make to factors of production.
can be computed as the payments firms make to factors of production, but not as revenues they receive from the sales of goods and services.
a.can be computed as payments firms make to factors of production plus revenues they receive from the sales of goods and services.
b.can be computed as the revenue firms receive from the sales of goods and services minus the payments they make to factors of production.
c.can be computed as either the revenue firms receive from the sales of goods and services or the payments firms make to factors of production.
d.can be computed as the payments firms make to factors of production, but not as revenues they receive from the sales of goods and services.
Explanation / Answer
The right answer is option C. can be computed as either the revenue firms receive from the sales of goods and services or the payments firms make to factors of production.
Explanation: GDP is the market value of all goods and services produced in a country in a given year. We need to consider either the revenue of the firm from the sales of goods and services or the factor payments made by the firm to calculate GDP. This is because the value of the revenue and the factor payments of the firm is equal. Counting both will result in the duble counting of GDP.
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