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In: Economics

As we know, GDP for country can be determined by GDP = C + I +...

As we know, GDP for country can be determined by GDP = C + I + G + NetExports.

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Expert Solution

Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of the country’s economic health.

Three main techniques can determine GDP. All should produce the same figure when properly calculated. These three methods are often referred to as the approach to spending, the approach to output (or manufacturing), and the approach to revenue.

The expenditure approach, also known as spending approach, calculates the spending by the different groups that participate in the economy. This approach can be calculated using the following formula: GDP = C + G + I + NX, or (consumption + government spending + investment + net exports). All these activities contribute to the GDP of a country. The U.S. GDP is primarily measured based on the expenditure approach.

The C is expenditure on personal consumption or customer spending. Consumers spend cash buying products and services for consumption, such as groceries and haircuts. The G reflects spending on public consumption and gross investment. Governments are spending cash on facilities, infrastructure, and payroll. The I is for national personal investment or expenditure on capital. NX is net exports, calculated as complete exports less complete imports (NX= imports). Goods and services produced by an economy that are exported to other nations are net exports, less imports carried in.


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