Which of the following is NOT true for a country’s GDP calculation using the expenditure method?Question 27Select one:a.The higher the value of exports (X) the higher the higher the value of GDP.b.The higher the value of investment spending (I) the higher the value of GDP.c.The higher the value of government spending (G) the higher the value of GDP.d.The higher the value of consumption spending (C) the higher will be the value of GDP.e.The higher the value of imports (M) the higher the higher the value of GDP.
Question
Which of the following is NOT true for a country’s GDP calculation using the expenditure method?Question 27Select one:a.The higher the value of exports (X) the higher the higher the value of GDP.b.The higher the value of investment spending (I) the higher the value of GDP.c.The higher the value of government spending (G) the higher the value of GDP.d.The higher the value of consumption spending (C) the higher will be the value of GDP.e.The higher the value of imports (M) the higher the higher the value of GDP.
Solution
The correct answer is e. The higher the value of imports (M) the higher the higher the value of GDP.
This statement is not true because in the expenditure method of GDP calculation, imports are subtracted from the total. This is because imports represent spending on goods and services not produced domestically, but rather abroad. Therefore, when the value of imports increases, it reduces the GDP.
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