Would you usually expect GDP as measured by what is demanded to be greater than GDP measured by what is supplied, or the reverse?

The expenditure approach is a method of calculating Gross Domestic Product (GDP) that focuses on the total spending on all final goods and services produced within a country's boundaries over a specific period. It's one of the primary ways to measure a country's economic activity.

According to this approach, GDP can be represented by the sum of four main components:

• Consumption (C): This represents the total value of all goods and services consumed by households. This includes spending on durable goods (like cars), nondurable goods (like food), and services (like healthcare).
• Investment (I): This refers to purchases made by businesses to produce more goods and services, including machinery, buildings, and inventory changes, as well as residential construction.
• Government Spending (G): Government expenditures on goods and services that are directly absorbed without any market transaction. This does not include transfer payments like pensions or unemployment benefits.
• Net Exports (NX): This is the value of a country's exports minus its imports. It reflects the country’s trade balance with the rest of the world.

The mathematical formula for the expenditure approach is:
\[GDP = C + I + G + (X - M)\]
Understanding each component is essential, as fluctuations in consumer behavior, investment decisions, government policies, and trade relationships vividly impact the nation's GDP.

The income approach is another technique utilized to estimate the GDP of a country. Instead of focusing on what is spent, this method looks at the income earned from the production of goods and services. Essentially, the income approach totals all the revenues that firms pay households for their involvement in the production process.

The income components can be broken down into the core earnings within an economy, which include:

• Wages: Payments to labor for their part in the production process.
• Profits: Earnings that businesses retain after paying out costs, including wages and taxes.
• Rents: Income received by owners of land and property.
• Taxes: Government revenue collected from businesses and includes taxes less subsidies on production and imports.

Mathematically, the formula looks like this:
\[GDP = Wages + Profits + Rents + Taxes\]
By summing these incomes, economists gain insight into the health of an economy from a different perspective than the expenditure approach. Though distinct, both approaches should theoretically tally to the same GDP figure when there are no measurement errors or unreported economic activities.

The concept of macroeconomic equilibrium occurs when an economy's aggregate demand equals its aggregate supply—or, in GDP terms, when the expenditure equals the income. At this point, all the goods and services produced in the economy are purchased, leaving no excess supply or demand.

This equilibrium is significant because it represents a state where the resources in an economy are being used at their most efficient level, without any wastes such as unsold products or idle labor. However, it's important to note that:

• Macroeconomic equilibrium is not static. Government policies, consumer confidence, global economic conditions, and other factors can shift demand and supply, disrupting the equilibrium.
• Equilibrium doesn't necessarily mean full employment or optimal production—it's more of a balance between production and spending within the current conditions.

When we talk about the GDP measurement, if the income approach and the expenditure approach give us the same number, we can say the economy is in macroeconomic equilibrium. However, discrepancies might occur due to factors like measurement errors or illegal and unreported transactions.

Consequently, while it's an essential concept for policy-making and economic analysis, macroeconomic equilibrium represents a theoretical state that economies continuously strive for, rather than a consistent reality.