we have and use three different ways of deriving the Gross Domestic Product namely Output, Income, and Expenditure (or final consumption) methods but why is it important to view the GDP from all three perspectives? what purpose does it serve? and how does it help macroeconomists, policymakers? how is it helpful?

It would be great if you could offer a detailed explanation. I am so thankful for your efforts. God bless!


1 Answer 1


These are three ways of calculating GDP - all of which in theory should sum to the same amount. Each of these approaches looks to best approximate the monetary value of all final goods and services produced in an economy over a set period of time (normally one year).

The major distinction between each approach is its starting point. The expenditure approach begins with the money spent on goods and services. Conversely, the income approach starts with the income earned (wages, rents, interest, profits) from the production of goods and services.


  1. https://www.tutor2u.net/economics/reference/measuring-national-income-gdp
  2. https://www.investopedia.com/ask/answers/070715/how-do-you-calculate-gdp-income-approach.asp
  • $\begingroup$ Thank you @Croves but I don't think this answers my question completely. Let me ask you this way - I looked over the internet and one of the website material said - three different ways helps us to understand the structure, changes, shocks in the economy, the sources of inequality, the prospects for the future but I didn't get how? how can they help establish this? $\endgroup$ Jan 29, 2020 at 17:31
  • 2
    $\begingroup$ I think this is valid only if you have the individual values for each variable. For example, looking for the Expenditure approach you can see the Government Spending vs Investiment Spending and try to take a conclusion from that. Same for the Income approach and compare income vs profits. But I honestly never have seen this kind of analysis before - you look at the GDP no matter which method was used to calculate it - and compare agains other macro variables like unemployment, inflation, GINI, IDH and so on. $\endgroup$
    – Croves
    Jan 29, 2020 at 17:36
  • $\begingroup$ Thank you so much. It lent me clarity. $\endgroup$ Jan 30, 2020 at 5:12

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