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When a country’s GDP is being measured by the output method, the total figure comes to $500bn. When measured by expenditure, we have the following components: Households’ spending on consumption = $300bn, Firms’ spending on capital goods = $50bn, Government spending on services = $80bn, Government spending on capital goods = $ $50bn, Government transfers (social security etc) = $10bn, Exports = $10bn and Imports = $20bn. In the circumstances, how can we say the output and expenditure methods of calculating GDP are equivalent?
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