Joe and Michelle have a partnership firm. Based on the income-based method of calculating GDP, what category is the income earned by their partnership firm a part of?

A) operating surplus

B) employee's compensation

C) mixed income

D) gross national product

Answer: B) employee’s compensation.

The income approach to measure gross domestic product or GDP starts with the income earned (wages plus plus rents plus interest plus profits) from the production of goods and services.

Based on the income-based method of calculating GDP, income or wages earned by Joe and Michelle for being partners can be categorized under B) employee’s compensation.