Using the expenditure approach, GDP is defined as the total value of final goods and services produced within a country during a given period, measured as which sum?

• A. $Y=C+S+T$
• B. $Y=W+R+i+\pi$
• C. $Y=C+I+G+X+M$
• D. $Y=C+I+G+(X-M)$

Answer: (D)

Verified step by step guidance

1. Understand that the expenditure approach to GDP measures the total value of final goods and services produced within a country by summing up different types of spending.
2. Identify the components of GDP in the expenditure approach: Consumption (C), Investment (I), Government Spending (G), and Net Exports (Exports minus Imports, or X - M).
3. Write the GDP formula using the expenditure approach as: \(Y = C + I + G + (X - M)\), where \(Y\) is GDP.
4. Recognize that Consumption (C) includes all private household spending on goods and services, Investment (I) includes business expenditures on capital goods, Government Spending (G) is government consumption and investment, and Net Exports \((X - M)\) accounts for the value of exports minus imports.
5. Note that this formula correctly captures the total spending on a country's final goods and services during a given period, which defines GDP using the expenditure approach.