Gross domestic product (GDP) is equal to the total sum of which four categories?

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

Answer: (A)

Verified step by step guidance

1. Recall the expenditure approach to calculating Gross Domestic Product (GDP), which sums up the total spending on final goods and services in an economy.
2. Identify the four main components of GDP according to the expenditure approach: Consumption (C), Investment (I), Government Purchases (G), and Net Exports (NX).
3. Understand that Net Exports (NX) is calculated as Exports (X) minus Imports (M), so NX = X - M.
4. Recognize that Consumption includes all private household spending, Investment includes business capital expenditures, Government Purchases cover government spending on goods and services, and Net Exports account for the trade balance.
5. Conclude that GDP is expressed as the sum: \(\text{GDP} = C + I + G + (X - M)\), which corresponds to the categories Consumption, Investment, Government Purchases, and Net Exports.