Final answer:
The GDP of a country measures the total economic activity and includes the monetary value of all goods and services produced within a given year. The GDP can be calculated using the Expenditure Approach by totaling spending on goods and services, or the National Income Approach by adding up all the income earned. A low GDP indicates a lower economic performance, not a high one.
Step-by-step explanation:
The Gross Domestic Product (GDP) of a country is a comprehensive measure of its economic activity. It represents the total monetary value of all goods and services produced within a country's borders in a given year. There are several ways to calculate GDP, with two primary approaches: the Expenditure Approach and the National Income Approach.
The Expenditure Approach sums up total spending on final goods and services in the economy. On the other hand, the National Income Approach adds up all the income earned by factors of production, which includes wages and salaries for labor, interest and dividends for capital, rent for land, and profit to entrepreneurs.
Accordingly, it is incorrect to conclude that the country's output of goods and services is very high if the GDP is found to be low. Instead, a low GDP suggests that the country's economic production and performance are not at their full potential. Moreover, classifying the earnings of partnership firms as mixed income is correct, but employee wages should not be categorized as operating surplus—they are part of the compensation of employees.