Gross Domestic Product (GDP) can be calculated by summing which of the following major components of spending in an economy?

Introduction / Context:
Gross Domestic Product, or GDP, is one of the most important macroeconomic indicators. It measures the market value of all final goods and services produced within a country in a given period. In the expenditure approach, GDP is broken into several broad spending categories. Examinations frequently test whether candidates remember the correct combination of these components and how they fit together in the standard GDP identity. Knowing this identity also helps you understand current affairs discussions about how different types of spending drive economic growth.

Given Data / Assumptions:

• The question uses the expenditure method of calculating GDP.
• We are asked which combination of terms correctly describes the sum used in this method.
• Standard macroeconomic notation uses C for consumption, I for investment, G for government purchases and NX for net exports.
• Net exports equals exports minus imports.

Concept / Approach:
Under the expenditure approach, GDP is calculated as GDP = C + I + G + NX. Here C represents private consumption by households, I represents gross private domestic investment, G represents government purchases of goods and services, and NX represents net exports. Net exports are exports minus imports, because imports are not produced domestically. The key point is that imports are not simply added as a positive item in the GDP formula. Instead, they enter the identity through the net exports term. Any option that adds imports directly without subtracting exports is therefore incorrect.

Step-by-Step Solution:
Step 1: Recall the basic expenditure identity for GDP: GDP = C + I + G + NX.Step 2: Interpret NX as net exports, that is exports minus imports.Step 3: Look for the option that explicitly includes consumption, investment, government purchases and net exports.Step 4: Identify that only the first option correctly captures all four standard components of the expenditure approach.

Verification / Alternative check:
You can quickly verify by checking any standard macroeconomics textbook or reliable economic summary, where the expenditure approach always appears in the same form. Another quick mental check is to ask how imports affect GDP. If an option simply adds imports directly, that would raise GDP when imports rise, which is not correct because imports are foreign produced goods. Instead, they must be subtracted from exports to get net exports. Thinking through this logic further confirms that consumption, investment, government purchases and net exports are the correct set of components in the expenditure method of calculating GDP.

Why Other Options Are Wrong:
Option B is wrong because it adds imports directly without considering exports, which is inconsistent with net exports. Option C is wrong because it replaces net exports with wages and salaries, which are part of the income approach, not the expenditure approach. Option D is wrong because it mixes household factor incomes rather than the spending categories needed for the expenditure method. Only the combination with net exports correctly reflects the standard GDP identity under the expenditure approach.

Common Pitfalls:
Candidates often mix up the expenditure and income approaches, confusing factor incomes such as wages, rent and interest with spending categories. Another common error is to forget that imports are not a separate positive term in the GDP formula but are netted out from exports. Students may also overlook that government purchases in this context refer to government spending on final goods and services, not transfer payments. Memorising the simple form GDP equals C plus I plus G plus NX and understanding what each letter stands for is the best way to avoid these mistakes in an exam setting.

Final Answer:
GDP can be calculated by summing consumption, investment, government purchases and net exports.