Expenditure Method Quiz

What is the expenditure method used for in economics?

• Analyze the distribution of income among different sectors

• Calculate the total value of goods and services produced in an economy by summing up all expenditures made by households, businesses, and the government on final goods and services.

• Estimate the population growth rate in an economy

• Determine the unemployment rate in an economy

Define the term 'expenditure' in the context of the expenditure method.

• Total amount of money invested in goods and services

• Total amount of money earned from goods and services

• Total amount of money saved on goods and services

• Total amount of money spent on goods and services in an economy during a specific period.

Explain the formula for calculating GDP using the expenditure method.

• GDP = C + I + G - (X - M)

• GDP = C + I + G + (X - M)

• GDP = C - I + G + (X - M)

• GDP = C + I - G + (X - M)

What are the components of expenditure in the expenditure method?

• savings

• imports

• consumption, investment, government spending, net exports

• exports

How is government spending included in the calculation of GDP using the expenditure method?

• Government spending is calculated separately from GDP

• Government spending is excluded from the calculation of GDP

• Government spending is included by summing up all government expenditures on final goods and services, including government consumption expenditures and gross investment.

• Government spending is only included if it exceeds a certain threshold

Discuss the importance of exports and imports in the expenditure method.

• Exports and imports are vital components of the expenditure method, influencing a country's trade balance, economic growth, and global competitiveness.

• Exports and imports have no impact on a country's economy

• Global competitiveness is not influenced by exports and imports

• Trade balance is not affected by exports and imports

What role does investment play in the expenditure method?

• Investment only includes spending on services

• Investment represents spending on capital goods.

• Investment is not included in the expenditure method

• Investment refers to personal savings

How does the expenditure method help in measuring the economic performance of a country?

• The expenditure method only considers spending on intermediate goods and services

• The expenditure method calculates the total value of goods and services produced outside a country's borders

• The expenditure method focuses solely on government spending and ignores private consumption

• The expenditure method calculates the total value of goods and services produced within a country's borders by considering total spending on final goods and services.

What are the limitations of the expenditure method in calculating GDP?

• Exclusion of non-market transactions, underground economy activities, intermediate goods, and double counting of goods and services.

• Exclusion of intermediate goods

• Inclusion of non-market transactions

• Counting of only final goods

Provide an example of how the expenditure method is applied in real-world economic analysis.

• Calculating GDP based only on government spending

• Using the expenditure method to analyze individual household budgets

• Estimating GDP by considering only exports and imports

• An example of how the expenditure method is applied in real-world economic analysis is by calculating a country's GDP using the total spending on consumption, investment, government spending, and net exports.