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Explain GDP expenditure approach and provide an example.

Explain GDP expenditure approach and provide an example.

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Answer #1

Answer: GDP expenditure method is a system of calculation of GDP using different components such as consumption of household, investment, government purchased and net export resulted from thebusiness profile .

Formula of GDP expenditure method is :

GDP =C+I+G+(X-M)

C- Consumer spending on goods and services.

I - Investor spending on business

G - Government purchase

X - Export

M - Import

As expenditure shows spending and need ofthe demand of the product in themarket place

As expenditure method show how money has been spend on different good and services

Example :

As consumption = $5000

Investment =$3000

Government purchase=$2500.

Export =$1000

Import =$500

Y= C+I+G+(X-M)= $5000+$3000+$2500 +($1000-$500) =$11000

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