Question

Which equation represents the relationship between GDP and the four major expenditure components?

1) GDP = Consumption + Investment + Government Spending + Net Exports
2) GDP = Consumption - Investment - Government Spending - Net Exports
3) GDP = Consumption * Investment * Government Spending * Net Exports
4) GDP = Consumption / Investment / Government Spending / Net Exports

Answer 1

The correct equation representing the relationship between GDP and its expenditure components is GDP = Consumption + Investment + Government Spending + Net Exports.

Step-by-step explanation:

The equation that represents the relationship between GDP (Gross Domestic Product) and the four major expenditure components is:

GDP = Consumption + Investment + Government Spending + Net Exports

This equation reflects the demand side of the economy, breaking down the total production into its parts: consumption by consumers, investment by businesses, spending by government on goods and services (government spending), and net exports, which is the value of exports minus the value of imports.