Compared to GDP calculated using the expenditure approach, gross domestic income will likely be:

Prepare for the CFA Investment Exam with our comprehensive quiz. Explore multiple choice questions with explanations to master the exam’s format and content. Get ready to achieve your CFA certification!

Gross Domestic Income (GDI) represents the total income earned by residents of a country, including wages, profits, rents, and taxes, less subsidies. The expenditure approach to calculating Gross Domestic Product (GDP) sums the total spending on a nation's final goods and services, which includes consumption, investment, government spending, and net exports.

In theory, GDP calculated using the expenditure approach and GDI should arrive at the same value because both measure the same economic activity from different perspectives. The expenditure approach illustrates how resources are utilized in the economy, while GDI focuses on the income generated from those resources.

However, discrepancies can arise due to statistical discrepancies in data collection methods, measurement errors, and timing differences between when income is earned and when it is spent. Nonetheless, for practical purposes and under normal circumstances, these two measures are intended to be equal in an efficient economy, often adjusted for inconsistencies to align closely. Therefore, in an ideal scenario, GDI will likely be the same as GDP calculated by the expenditure approach.

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy