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Economics For Today

10th Edition
Tucker
Publisher: Cengage Learning
ISBN: 9781337613040

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BuyFindarrow_forward

Economics For Today

10th Edition
Tucker
Publisher: Cengage Learning
ISBN: 9781337613040
Chapter 15, Problem 8SQ
Textbook Problem
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All final goods and services that make up GDP can be expressed as

  1. a. GDP = C + IG + (X + M)
  2. b. GDP = C + I + G + (X + M)
  3. c. GDP = C + I + G + (XM)
  4. d. GDP = C + I + (X − M)
  5. e. GDP = C + I + G

To determine

The items included in the calculation of GDP.

Explanation of Solution

The gross domestic product is the sum total of the money values of all the goods and services produced within the political boundary of an economy within a specific period of time, which is usually one financial year. The money value of all the final goods and services that are produced within the economy will be summated in order to calculate the GDP.

Option (c):

The consumption expenditure is denoted by C, the investment expenditure is indicated by I, the government expenditure is indicated by G, and the net export is calculated by subtracting the imports from exports of the economy denoted by (X-M). Thus, summating all the expenditures from the economic agents, it gives the equation of GDP=C+I+G+(XM) for the expenditure method of calculating the GDP. This makes option 'c' as the correct answer.

Option (a):

The consumption expenditure, government expenditure, investment expenditure, and the net exports are given

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