Which components are summed in the expenditure approach to measuring GDP?

• A. Imports, exports, and transfer payments
• B. Wages, rents, interest, and profits
• C. Personal income, corporate income, and taxes
• D. Consumption, investment, government spending, and net exports

Answer: (D)

Verified step by step guidance

1. Understand that the expenditure approach to measuring GDP sums up the total spending on final goods and services produced within a country during a specific period.
2. Identify the four main components included in this approach: Consumption (C), Investment (I), Government Spending (G), and Net Exports (NX).
3. Recall that Net Exports (NX) is calculated as Exports (X) minus Imports (M), so NX = X - M.
4. Recognize that transfer payments, wages, rents, interest, profits, personal income, and corporate income are not directly summed in the expenditure approach; they belong to other methods or concepts in national accounting.
5. Therefore, the expenditure approach formula for GDP is expressed as: \(GDP = C + I + G + (X - M)\).