GDP is best described as:

• A. A measure of total national income
• B. The sum of consumer spending and government tax revenue
• C. Gross domestic product equals consumer spending plus government spending plus investments plus exports minus imports
• D. The total value of goods and services produced within a country in a year

Answer: (C)

GDP is the total value of final goods and services produced within a country in a year, and the standard way to calculate it is by the expenditure approach: consumption plus investment plus government spending plus net exports (exports minus imports). This formula—C + I + G + (X − M)—shows how demand drives production and uses final goods to avoid double counting. The reason this is the best description is that it not only defines GDP as production in a country over a year, but also shows the exact components that economists sum to arrive at a single monetary value.

Other descriptions are less precise for calculation: GDP isn’t just total national income, and it isn’t the sum of consumer spending and government tax revenue. It also isn’t simply “production value” without specifying how that production is measured or what counts as net exports.