Explain GDP expenditure approach and provide an example.
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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