If C = consumption, G = government expenditures, and I = gross private investment expenditures, the mathematical representation of Gross Domestic Product (GDP) using the expenditure approach is
A) Gross Domestic Product (GDP) = C + I + G + Transfers.
B) Gross Domestic Product (GDP) = C + I + G + Imports.
C) Gross Domestic Product (GDP) = C + Imports.
D) Gross Domestic Product (GDP) = C + I + G + Net exports.

Question

Quizplus · Accepted Answer

The mathematical representation of GDP using the expenditure approach is GDP = C + I + G + Net exports. This formula includes consumption (C), gross private investment expenditures (I), and government expenditures (G) while subtracting imports (M) from exports (X) to obtain net exports. This is because imports are considered a leak in the economy while exports are an injection, so the difference is added or subtracted depending on whether there is a trade surplus or deficit. Therefore, choice D is the correct answer.

If C = Consumption, G = Government Expenditures, and I