What is the most correct reason for subtracting imports when calculating GDP?
Answer and explanation
Correct answer: Imports are not domestic output
GDP measures the value of final goods and services produced within a country’s domestic territory. Total expenditure may include spending on imported goods, so imports are subtracted in the expression C + I + G + (X − M) to remove the value of foreign production. The subtraction is not based on price, payment method, or taxation.
Frequently asked questions
What is the correct answer to this question?
Imports are not domestic output
Why is this the correct answer?
GDP measures the value of final goods and services produced within a country’s domestic territory. Total expenditure may include spending on imported goods, so imports are subtracted in the expression C + I + G + (X − M) to remove the value of foreign production. The subtraction is not based on price, payment method, or taxation.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
