ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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government spending
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export spending
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import spending
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investment by business
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Detailed explanation-1: -Imports are subtracted while calculating GDP primarily because imported goods and services also appear as elements in government spending, consumption, investments, and exports. For this reason, imports are subtracted to ensure that only internally produced products are considered. Here is an example.
Detailed explanation-2: -As such, the value of imports must be subtracted to ensure that only spending on domestic goods is measured in GDP.
Detailed explanation-3: -The GDP calculation accounts for spending on both exports and imports. Thus, a country’s GDP is the total of consumer spending (C) plus business investment (I) and government spending (G), plus net exports, which is total exports minus total imports (X – M).
Detailed explanation-4: -GDP = C + I + G + X – M I = Investment expenditure. G = Government expenditure. X = Total exports. M = Total imports.
Detailed explanation-5: -Why is import spending subtracted from the sum of consumption, investment, government purchases, and export spending in computing GDP? Import spendings are subtracted from the sum of consumption, investment & government purchases because it is produced here in states but is not sold here.