In the expenditure method, selling software made in India to a foreign customer will be placed in which component?
Answer and explanation
Correct answer: Exports
Software produced in India and sold to a foreign customer is a domestically produced service purchased by the rest of the world. It is therefore recorded as an export and increases the X component of net exports. In the expenditure identity, GDP = C + I + G + (X − M). Imports are purchases of foreign output by domestic residents, so they do not describe this transaction.
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What is the correct answer to this question?
Exports
Why is this the correct answer?
Software produced in India and sold to a foreign customer is a domestically produced service purchased by the rest of the world. It is therefore recorded as an export and increases the X component of net exports. In the expenditure identity, GDP = C + I + G + (X − M). Imports are purchases of foreign output by domestic residents, so they do not describe this transaction.
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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