GDP is calculated as which components?

• A. Consumer spending, government spending, investments, exports minus imports
• B. Wages, profits, rents, taxes
• C. Net capital inflows and foreign exchange reserves
• D. Total government revenue minus expenditures

Answer: (A)

GDP is the total value of goods and services produced in an economy during a specific period. When using the expenditure approach, GDP equals the sum of spending on domestically produced output: consumer spending, business investment in capital goods, government purchases of goods and services, and net exports (exports minus imports). Exports add to GDP because they are produced domestically and sold abroad, while imports are subtracted since they represent spending on goods produced outside the country. So the components are consumer spending, investments, government spending, and exports minus imports. The other options describe income earned from production, financial flows, or fiscal balances, which are not the expenditure components used to calculate GDP.