ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Consumption Expenditures
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Investment Expenditures
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Government Expenditures
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Net Imports
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Detailed explanation-1: -The formula for calculating GDP with the expenditure approach is the following: GDP = private consumption + gross private investment + government investment + government spending + (exports – imports). GDP is usually calculated by the national statistical agency of the country following the international standard.
Detailed explanation-2: -In calculating GDP, investment does not refer to the purchase of stocks and bonds or the trading of financial assets. It refers to the purchase of new capital goods, that is, business equipment, new commercial real estate (such as buildings, factories, and stores), residential housing construction, and inventories.
Detailed explanation-3: -The four components of gross domestic product are personal consumption, business investment, government spending, and net exports. 1 That tells you what a country is good at producing. GDP is the country’s total economic output for each year.
Detailed explanation-4: -GDP = consumption + investment + government spending + net exports. In this case, $200 million + 55 million + $120 million + $80 million + $45 million = $500 million. Then imports of $50 million is subtracted to get GDP = $450 million.