NISM Certifications · NISM-Series-XV: Research Analyst · Economic Analysis
Under the expenditure approach, GDP at market prices is computed as consumption plus investment plus government spending plus:
GDP by the expenditure approach equals consumption plus investment plus government spending plus net exports, meaning exports minus imports. Imports are subtracted because that spending goes to foreign production and is not part of domestic output.
- AExports plus imports
- BExports minus importsCorrect
- CImports minus exports
- DExports only
Explanation
The expenditure identity is GDP = C + I + G + (X - M). Net exports are exports less imports because imports represent spending on foreign output that must be removed from domestic expenditure. Adding imports would overstate domestic production.
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