Which statement best describes gross domestic product (GDP) as measured by the expenditure approach?

• A. The market value of all intermediate and final goods and services produced within a country’s borders during a given period.
• B. The total value of all goods and services bought by households and firms, excluding government purchases and net exports.
• C. The market value of all final goods and services produced within a country’s borders during a given period, calculated as $GDP=C+I+G+(X-M)$.
• D. The total income earned by a country’s residents from production anywhere in the world during a given period (including net factor income from abroad).

Answer: (C)

Verified step by step guidance

1. Understand that Gross Domestic Product (GDP) measures the total market value of all final goods and services produced within a country's borders during a specific time period.
2. Recognize that the expenditure approach calculates GDP by summing up different types of spending in the economy: consumption (C), investment (I), government purchases (G), and net exports (exports minus imports, X - M).
3. Write down the expenditure approach formula for GDP as: \[GDP = C + I + G + (X - M)\] where each component represents a category of spending.
4. Note that intermediate goods are excluded to avoid double counting, so only final goods and services are included in GDP.
5. Distinguish GDP from other measures like Gross National Product (GNP), which includes income earned by residents from abroad, whereas GDP focuses strictly on production within the country's borders.