Joe Producer makes a product that sells for $1,000. In the production process, he pays $750 for wages, $125 for materials, and $ 75 for rent. Three-fourths of Joe's output is consumed and the rest is invested.
Explain how both the flow-of-product approach and the earnings approach can be used to measure GDP and the role profit plays in these calculations. Calculate GDP for Joe using both the product and income approaches and show how they must agree.