The sum total of aggregate factor payments in an economy, the national income,…

In national income accounting, an economy's Gross Domestic Product (GDP) can be measured by three equivalent approaches: the income method (summing the wages, rent, interest, and profit paid to factors of production), the product or value-added method (summing the market value of final goods and services produced), and the expenditure method. In the standard introductory circular-flow framework used to present this identity — a simple closed economy where net indirect taxes and consumption of fixed capital are assumed away — the income-method total equals the product-method total, because every unit of factor income paid out by producers is exactly financed by the sale value of the final output they produce.

The stem restates this identity in words: the sum total of aggregate factor payments — called national income — is set equal to the aggregate value of the output of final goods. Both phrases describe the same macroeconomic aggregate viewed from two different measurement approaches (the income side and the product side), so the blank must name that single aggregate.

• net income — an income aggregate obtained by deducting consumption of fixed capital (depreciation) from a corresponding gross aggregate (a gross-to-net adjustment, separate from the domestic-to-national adjustment made via net factor income from abroad); a different accounting variable from the raw value-of-output aggregate in the stem.

• equilibrium income — the income level at which planned aggregate expenditure equals planned aggregate output in the Keynesian income-determination model; a condition satisfied under specific circumstances, not the accounting identity stated in the stem.

• aggregate demand — the total planned expenditure on final goods and services in the economy at a given price level; a demand-side concept, distinct from the value of output actually produced.

Since the income-method total (national income) and the product-method total (value of final output) are two equal names for the same aggregate, the blank is filled by gross domestic product.