Which of the following lists the main components used to calculate a country's Gross Domestic Product (GDP) using the expenditure approach?

• A. Consumption, Investment, Government Spending, Taxes
• B. Consumption, Investment, Government Spending, Net Exports
• C. Consumption, Savings, Imports, Exports
• D. Investment, Government Spending, Taxes, Net Exports

Answer: (B)

Verified step by step guidance

1. Step 1: Understand that the expenditure approach to calculating GDP sums up all spending on final goods and services produced within a country during a specific period.
2. Step 2: Recall the main components of GDP using the expenditure approach, which are Consumption (C), Investment (I), Government Spending (G), and Net Exports (NX).
3. Step 3: Recognize that Net Exports (NX) is calculated as Exports (X) minus Imports (M), representing the value of goods and services sold abroad minus those purchased from abroad.
4. Step 4: Note that Taxes and Savings are not directly included in the expenditure approach formula for GDP, so any list including these is incorrect for this context.
5. Step 5: Conclude that the correct list of components for GDP by expenditure approach is Consumption, Investment, Government Spending, and Net Exports.