What is the income approach to gross domestic product (GDP)?

The income approach to Gross Domestic Product (GDP) calculates the total national income, including wages, rents, interest, and profits earned by the country over a specific period. This method is based on the premise that all outputs produced by an economy result in incomes for those who contributed to the production process.

How to calculate GDP based on income approach?

GDP= C + S + T GDP = C +S + T Therefore, we see that the GDP or the aggregate income in the economy is the sum of total consumption ( C C ), total savings ( S S ), and net taxes ( T T ). This is yet another way to present GDP when applying the income approach. The GDP figure as per the income approach may be estimated in two ways.

What is an alternative method of calculating GDP?

In this video we explore an alternative method of calculating GDP: the income approach. The intuition behind the income approach is pretty straightforward because every time you spend money, that spending is someone else's income. Learn more about the income approach and its categories: wages, interest, rent, and profit. Created by Sal Khan.