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.

  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. Nominal GDP

    A gross domestic product (GDP) figure that has not been adjusted ...
  5. Real Gross Domestic Product (GDP)

    An inflation-adjusted measure that reflects the value of all ...
  6. Sales Tax

    A consumption tax imposed by the government on the sale of goods ...
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