Which of the following statements about the expenditure method are correct?
(A) Aggregate imports M = Cm + Im + Gm, the import parts of consumption, investment and government expenditure.
(B) X denotes the aggregate expenditure by foreigners on the exports of the economy.
(C) C − Cm is the part of final consumption expenditure spent on the domestic firms.
(D) Imports are added to C + I + G to get GDP.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A), (B) and (C) only
Spending on imports goes to foreign firms, so it is taken out: GDP = C + I + G + X − M.
(A) Aggregate imports M = Cm + Im + Gm, the import parts of consumption, investment and government expenditure. — True. Aggregate imports are the import parts of C, I and G.
(B) X denotes the aggregate expenditure by foreigners on the exports of the economy. — True. X is spending by foreigners on the country’s exports.
(C) C − Cm is the part of final consumption expenditure spent on the domestic firms. — True. C − Cm is the consumption spending that reaches domestic firms.
(D) Imports are added to C + I + G to get GDP. — False. Imports are subtracted from C + I + G + X, not added.
NCERT (2026-27): “2.2.2 Expenditure Method … Let Cm denote expenditure on the imports of consumption goods. Therefore C – Cm denotes that part of aggregate final consumption expenditure that is spent on the domestic firms. …” “2.2.2 Expenditure Method … M ≡ Cm + Im + Gm is the aggregate imports expenditure incurred by the economy. …” “2.2.2 Expenditure Method … (d) the export revenues that firm i earns by selling its goods and services abroad. This will be denoted by Xi. …” |