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. 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. Crowding Out Effect

    An economic theory stipulating that rises in public sector spending ...
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. Fundamental Analysis

    Emerging Markets: Analyzing Colombia's GDP

    With a backdrop of armed rebels and drug cartels, the journey for the Colombian economy has been anything but easy.
  5. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  6. Economics

    Oil Is Cheaper Than Bread In Venezuela...The Country Is In Chaos

    Venezuela is floundering, and the story has more to do with just the falling price of oil.
  7. Economics

    Benefits of China Changing It's One Child Policy

    China's one-child policy is changing, and investors are looking for ways to cash in. The reform might not have the effects that many anticipate, however.
  8. Fundamental Analysis

    Emerging Markets: Analyzing Chile's GDP

    Chile has become one of the great economic success stories of Latin America.
  9. Entrepreneurship

    START-UP NY: How a Tax-Free Zone Would Work

    START-UP NY is an initiative designed to attract companies to New York State by giving them 10 years of tax breaks. Sounds good, but is it a success?
  10. Economics

    Explaining Capital Flows

    The movement of money for investing, trade or business production, is commonly referred to as capital flows.
  1. Is Japan an emerging market economy?

    Japan is not an emerging market economy. Emerging market economies are characterized by low per capita incomes, poor infrastructure ... Read Full Answer >>
  2. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
  3. Where are the Social Security administration headquarters?

    The U.S. Social Security Administration, or SSA, is headquartered in Woodlawn, Maryland, a suburb just outside of Baltimore. ... Read Full Answer >>
  4. Is the Social Security administration a government corporation?

    The U.S. Social Security Administration (SSA) is a government agency, not a government corporation. President Franklin Roosevelt ... Read Full Answer >>
  5. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
  6. Which is more important to a nation's economy, the balance of trade or the balance ...

    There is no question the composition of a country's balance of payments is more important than its balance of trade. This ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!