What is the formula for calculating GDP using the expenditure approach?

The expenditure approach to calculating Gross Domestic Product (GDP) focuses on the total spending on the nation’s final goods and services over a specific period. The formula involves four main components: consumption (C), investment (I), government spending (G), exports (X), and imports (M).

In the correct formulation, GDP is expressed as the sum of consumption, investment, and government spending plus net exports, which is calculated as exports minus imports. This representation clearly captures the total expenditure in the economy.

Thus, the formula is structured as follows: GDP equals consumption (C) plus investment (I) plus government spending (G) plus the difference between exports (X) and imports (M), represented as (X - M). This formula effectively accounts for the total value of goods and services produced in a country and illustrates how different sectors contribute to the overall economy.

Using this understanding, the correct option conveys how expenditure in each of these areas contributes to the GDP, highlighting the significance of both domestic consumption and international trade in economic measurement.