Calculate the gross domestic product of a country if, in a given year, consumer spending is 400 million dollars, government spending is 150 million dollars, business investment is 80 million dollars, exports are 35 million dollars, and imports are 40 million dollars.

Introduction / Context:
This question tests the ability to apply the expenditure approach to calculating gross domestic product, commonly abbreviated as GDP. The expenditure method is a standard formula taught in macroeconomics, where GDP is computed as the sum of spending on final goods and services in an economy over a given period. Understanding which components to add and how to treat exports and imports is crucial for getting the correct total.

Given Data / Assumptions:

• Consumer spending (C) is 400 million dollars.
• Government spending (G) is 150 million dollars.
• Business investment (I) is 80 million dollars.
• Exports (X) are 35 million dollars.
• Imports (M) are 40 million dollars.
• All values are for the same year and are measured in current prices.

Concept / Approach:
The expenditure approach to GDP uses the formula GDP = C + I + G + (X - M). The term (X - M) is called net exports, which adjusts for the fact that imports are included in C, I, and G but are not part of domestic production. Exports add to domestic production because they are produced at home and sold abroad, while imports represent foreign production and must be subtracted.

Step-by-Step Solution:
1. Write down the expenditure formula for GDP: GDP = C + I + G + (X - M).2. Substitute the given values: C = 400, I = 80, G = 150, X = 35, and M = 40 (all in millions of dollars).3. First compute C + I: 400 + 80 = 480.4. Add government spending: 480 + 150 = 630.5. Compute net exports: X - M = 35 - 40 = -5.6. Add net exports to the previous subtotal: 630 + (-5) = 625.7. Therefore, GDP equals 625 million dollars.

Verification / Alternative check:
A quick check is to verify that imports have been correctly subtracted. If we ignored imports, we would mistakenly compute GDP as 400 + 80 + 150 + 35 = 665. However, this would count imported goods that are included in consumer or government spending as if they were domestic production. Subtracting imports of 40 brings the figure back down to 625, which is more accurate as a measure of domestic production. Both the step-by-step calculation and this quick logic check point to the same result of 625 million dollars.

Why Other Options Are Wrong:
Option B: 465 million is too low and likely results from leaving out one or more components such as government spending or investment.
Option C: 475 million could come from adding some components incorrectly or miscalculating net exports.
Option D: 635 million suggests that exports were added without subtracting imports, failing to adjust for foreign production.
Option E: 515 million does not follow from the correct application of the expenditure formula and indicates a misstep in arithmetic or in including the wrong components.

Common Pitfalls:
Students often forget to subtract imports, or they mistakenly subtract exports and add imports. Always remember that exports represent domestic production sold abroad and should be added, while imports represent foreign production consumed domestically and should be subtracted. Another common mistake is to mix up business investment with financial investment like buying stocks, but in GDP accounting, investment refers to spending on new capital, inventories, and residential construction. Carefully identifying each component helps avoid these errors.

Final Answer:
The gross domestic product in this case is 625 million dollars.