Which formula represents GDP using the expenditure approach?

The formula that accurately represents GDP using the expenditure approach is GDP = C + I + G + (X - M). This framework captures the total economic output by accounting for all expenditures made within an economy.

In this formula:

• C represents consumption, which includes all private expenditures by households and non-profit institutions.

• I stands for investment, which comprises business investments in equipment and structures, as well as residential construction.
• G signifies government spending on goods and services that contribute to the economy.
• (X - M) accounts for net exports, where X is total exports of goods and services, and M is total imports. This subtraction reflects the fact that imports subtract from overall economic output since they represent spending on goods produced outside the domestic economy.

Using this approach, the formula provides a comprehensive snapshot of a country's economic activity by summing all final expenditures made within the economy over a specific period. The correct formulation ensures that all key components of GDP are included in a manner that appropriately reflects their contribution to the overall economic output.

Other options fail to correctly structure these elements or misuse the components in a way that does not align with standard economic definitions, particularly in how net exports are treated or in what constitutes government spending.