If a good produced within a country is sold abroad, how is it recorded under the expenditure method of calculating GDP?
Answer and explanation
Correct answer: It is added as an export
A good produced domestically and sold to a foreign buyer is an export. Under the expenditure method, GDP is calculated as C + I + G + (X − M), where X represents exports and M represents imports. Exports are added because they are part of domestic production purchased by foreigners; imports are subtracted because they were produced outside the country.
Frequently asked questions
What is the correct answer to this question?
It is added as an export
Why is this the correct answer?
A good produced domestically and sold to a foreign buyer is an export. Under the expenditure method, GDP is calculated as C + I + G + (X − M), where X represents exports and M represents imports. Exports are added because they are part of domestic production purchased by foreigners; imports are subtracted because they were produced outside the country.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Methods of calculating national income - Expenditure Method.
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