Page 43 - Macroeconomics. book docx_Neat

4.1 Introduction

In the previous chapters, we studied the basic concepts of macroeconomics and

macroeconomic activities. We also explained how national income can be measured and

focused on the income approach, which measures national income through incomes

earned by factors of production.

In this chapter, we move to the spending approach, which is another important method
of measuring national income. This approach focuses on total spending on goods and

services in the economy during a specific period of time, usually one year.

The spending approach is based on a simple economic logic: what is spent in the

economy equals what is produced, and what is produced equals what is earned as
income.

4.2 The Concept of the Spending Approach

The spending approach measures national income by adding all expenditures on final

goods and services produced within an economy.

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