Canadian Securities Course (CSC) Level 1 Practice Exam

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What is the formula for Expenditure GDP?

C= Consumers
GDP= C+I+G+(X-M)
I= Business spending and investment
X=The amount of exports that consumers/businesses buy

The correct answer is: GDP= C+I+G+(X-M)

The formula for Expenditure GDP is correctly represented by the equation GDP = C + I + G + (X - M). In this formula, "C" stands for consumer spending, which encompasses all household expenditures on goods and services. "I" represents business investment, which includes spending on capital goods that will be used for future production. "G" indicates government spending on goods and services. The terms "X" and "M" represent exports and imports respectively, and the difference between these two (X - M) accounts for the net exports, which reflects the value of goods and services produced domestically and consumed abroad versus those produced abroad and consumed domestically. This comprehensive formula is essential for understanding how all these components contribute to the overall economic output, highlighting that GDP measures the total economic activity or expenditure within a country.