Question:

For the economy as a whole, total expenditure on goods and services relative to cost?

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For the economy as a whole, total expenditure on goods and services .

a. is slightly more than the cost of production

b. is slightly more than the value of production

c. is slightly less than the value of production

d. equals total income

The answer is a or b right? which one?

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4 ANSWERS


  1. The key word is 'total'

    Total a.k.a Aggregate

    In Macroeconomics, we know that AE = Y

    Where AE = Aggregate Expenditure, Y = Income or Output


  2. D.  Every time a good is sold, it is income for some one else.  So expenditure must equal income.

  3. Test time huh? it is d expenditures = income

  4. "A" is right one. Difference is called profits.

    P.S. "D" seems wrong because consumption expenditures are less than income - some of income will be spent on investments and not only on goods and services, sometimes expenditures can be more than income (borrowings), international trade should be considered too, etc.

    PPS All right, all right - goofed a bit definitions.

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