Expenditure Method

DEFINITION of 'Expenditure Method'

A method for calculating GDP that totals consumption, investment, government spending and net exports. Although GDP can be calculated through other methods, the expenditure method is the most common. The formula for its calculation is often expressed as.


GDP = C + G + I + NX

This calculation gives us nominal GDP, which must then be adjusted for inflation to give us the real GDP.

BREAKING DOWN 'Expenditure Method'

GDP is supposed to measure a country's standard of living and economic health. Critics such as Nobel Prize-winning economist Joseph Stiglitz caution that GDP should not be taken as an all-encompassing indicator of a society's well being, since it ignores important factors that make people happy. For example, GDP does not consider work-life balance or the quality of interpersonal relationships.



RELATED TERMS
  1. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
  2. Negative Growth

    A contraction in a country's economy, as evidenced by a decrease ...
  3. Per Capita Gross Domestic Product

    Per capita GDP is a measure of the total output of a country ...
  4. Real Gross Domestic Product (GDP)

    An inflation-adjusted measure that reflects the value of all ...
  5. Nominal GDP

    A gross domestic product (GDP) figure that has not been adjusted ...
  6. Tight Monetary Policy

    A course of action undertaken by the Federal Reserve to constrict ...
Related Articles
  1. Retirement

    Consumer Confidence: A Killer Statistic

    The consumer confidence is key to any market economy, so investors need to learn the measures and how to analyze them.
  2. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  3. Economics

    The Importance Of Inflation And GDP

    Learn the underlying theories behind these concepts and what they can mean for your portfolio.
  4. Economics

    Industries That Thrive On Recession

    Recessions are not equally hard on everyone. In fact, there are some industries that even flourish amid the adversity.
  5. Fundamental Analysis

    The Evolution of Obamacare Since Its Inception

    Find out whether the Patient Protection and Affordable Care Act, also known as Obamacare, has lived up to its lofty projections from 2010.
  6. Stock Analysis

    The Biggest Risks of Investing in Lockheed Martin Stock (LMT)

    Learn about defense contractor, Lockheed Martin, its leadership within its industry, and how the company can stay on top as the defense landscape changes.
  7. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  8. Forex

    The Consumer Price Index

    Find out how this economic measure can help you make key financial decisions.
  9. Economics

    Understanding the History of Money

    Money has been a part of human history for at least 3,000 years, evolving from bartering to banknotes.
  10. Stock Analysis

    China Mobile: Just How Big is It? (CHL, CHU, CHA)

    The story behind China Mobile, the biggest company you might never have heard of.
RELATED FAQS
  1. What is comparative advantage?

    Comparative advantage is an economic law that demonstrates the ways in which protectionism (mercantilism, at the time it ... Read Full Answer >>
  2. How does the Wall Street Journal prime rate forecast work?

    The prime rate forecast is also known as the consensus prime rate, or the average prime rate defined by the Wall Street Journal ... Read Full Answer >>
  3. What's the difference between microeconomics and macroeconomics?

    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and ... Read Full Answer >>
  4. How do you make working capital adjustments in transfer pricing?

    Transfer pricing refers to prices that a multinational company or group charges a second party operating in a different tax ... Read Full Answer >>
  5. How much money does Florida make from unclaimed property each year?

    Each year, goods such as money, financial investments and physical property are either auctioned off or appraised before ... Read Full Answer >>
  6. How much money does New York make from unclaimed property each year?

    According to the Office of the New York State Comptroller, types of unclaimed property accounts include bank accounts, wages, ... Read Full Answer >>
Hot Definitions
  1. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  2. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  3. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  4. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  5. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center