Answer to Question #47188 in Macroeconomics for Murad

Question

2 questions:

1. If interest paid on public debt is not included in government expenditures (i.e. not included in GDP expenditure approach) but this same very interest is income for bondholders (whether be it corporate profits for financial companies, interest received or some other type of income), so that it's included in GDP income approach. So, how in this case the two GDPs (i.e. expenditure and income approach) correspond with each other?
2. Is interest paid on consumer loans (i.e. by households) included in GDP and what might the corresponding entry in GDP expenditure approach?

Answer 1

1. Interest paid on public debt is actuallyincluded in government expenditures according to GDP expenditure approach) and
is also calculated as income for bondholders and it is included in GDP income approach. So, how in this case the two GDPs (i.e. expenditure and income approach) correspond with each other?
2. Interest paid on consumer loans (i.e. by households) is also included in GDP.