Question

1)Explain the Expenditures approach equation which constitutes GDP.

Answer 1

In the expenditure approach, all expenses on output in an economy are categorized into four types.

The equation used in the expenditure approach to calculating GDP is as follows:

GDP = C + I + G+ NX

In which, C = Private Consumption Expenditures ( All private consumption expenses on goods and services)

, G = Government Expenditures (All government expenses on goods and services)

I = Investment Expenditures (All investment expenses by households and firms)

and NX = Net Exports i.e Exports - Imports