10.1 The Economy’s Income and Expenditure

The expenditure approach of measuring GDP begins with the money spent on goods and services. Conversely, the income approach starts with the income earned (wages, rents, interest, profits) from the production of goods and services. ^[1]

Example: Consumers spend money to buy various goods and services, and businesses spend money as they invest in their business activities, by buying machinery, for instance. And governments also spend money. All these activities contribute to the GDP of a country. Similarly, in the income approach, GDP is based on a tally of the national income. ^[1]

^{Income and Expenditure GDP [2]}