Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.

The sum of total expenditure incurred in the economy must be equal to the factor income received by all the factors of production in an economy because the revenue earned by all the firms when taken together must be distributed among the factor of production as compensation.

This will be spent on buying various final goods and services, that is final expenditure will be incurred by way of –

Private Final Consumption Expenditure

Government Final Consumption Expenditure

Government Debt Consolidation Fund and

Net Exports