ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Exports are added to the other categories of expenditures.
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Imports are added to the other categories of expenditures.
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Both exports and imports are added to the other categories of expenditures.
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Both exports and imports are subtracted from the other categories of expenditures.
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Detailed explanation-1: -When using the expenditures approach to calculating GDP the components are consumption, investment, government spending, exports, and imports.
Detailed explanation-2: -(Exports are added to the value and imports are subtracted). Of all the components that make up a country’s GDP, the foreign balance of trade is especially important.
Detailed explanation-3: -The expenditure approach uses four critical types of spending: consumption, investment, net exports of goods and services, and government purchases of goods and services to calculate gross domestic product (GDP).
Detailed explanation-4: -The reason imports are subtracted in the standard national income identity is because they have already been included as part of consumption, investment, government spending, and exports. If imports were not subtracted, GDP would be overstated.