Question

In: Economics

Which of the following is the correct GDP identity?

Which of the following is the correct GDP identity?

  •  Y=C+I-G +M-X

  •  Y=C+I+G+ M-X

  •  Y=C+I+T

  •  Y=C+I+G+X-M



Solutions

Expert Solution

GDP identity is

Y=C+I+G+X-M

So fourth option is correct.

Here C is the consumption

I is the investment

G is the govt expenditure

X is export

M is import.

Sometimes X-M is known as net export .

This method of calculation is known as GDP calculation via expenditure. There are other methods also to calculate GDP. The other method are income method, value added method etc.

Rahul Sunny answered 2 years ago
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