Question

Difference between income method and expenditure method

Answer 1

Income method

In the income method the GDP or Gross Domestic Product is calculated by adding factor incomes. It is the sum of the incomes earned through the production of goods and services.

 

Expenditure method

In the expenditure method the GDP is calculated by adding the consumption, investment, government spending and net exports. It includes the expenditure incurred by different economic agents involved in production and comsumption.

 

The basic difference between the two methods is in terms of the components which are used to measure the GDP. 

Answer 2

The income method is actually the approach in order to measure the gross domestic product with the help of addition of all income earned from all economic product as well as services.It is based that all the income atleast equal to all the expenditures.

While in the expenditure method, GDP is calculated using all the spending of government  as well as the whole of consumption along with investments and counting of net export. All the expenditures are added up.