Which list correctly identifies the four expenditure components used to measure GDP (using the expenditure approach)?

• A. Intermediate goods, final goods, depreciation, and capital gains
• B. Consumption (C), Investment (I), Government purchases (G), Net exports (NX)
• C. Consumption (C), Savings (S), Taxes (T), Transfers (TR)
• D. Wages, rent, interest, and profit

Answer: (B)

Verified step by step guidance

1. Understand that GDP measured by the expenditure approach sums up all spending on final goods and services produced within a country during a specific period.
2. Recall the four main expenditure components of GDP: Consumption (C), Investment (I), Government purchases (G), and Net exports (NX).
3. Recognize that intermediate goods are not included separately because their value is already embedded in final goods to avoid double counting.
4. Note that depreciation and capital gains are not expenditure components; depreciation relates to the value of capital used up, and capital gains are changes in asset prices, not current production.
5. Identify that savings, taxes, transfers, wages, rent, interest, and profit are related to income or financial flows, not direct expenditure components in the GDP calculation.