With reference to the methods of calculating Gross Domestic Product (GDP), consider the following statements: 1. The income method includes the total earnings of factors of production like labour and capital. 2. The expenditure method includes consumption, investment, government spending, and net exports. 3. The production method calculates GDP by adjusting nominal GDP for taxes and subsidies to derive real GDP. Which of the statements given above is/are correct? |ForumIAS

[A] 1 and 2 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: A

Notes:

Explanation:

The income method considers the income of labour and capital (factors of production).
The expenditure method is calculated as C + I + G + (X – IM).
The production/output method involves calculating the market value of all goods/services produced, and Real GDP is GDP at constant prices. It does not derive real GDP by subtracting taxes and adding subsidies from nominal GDP. In fact, GDP at market price = GDP at factor cost + Indirect Taxes – Subsidies, not Real GDP.

Source: Laxmikant (Polity)