GDP (Expenditure Approach)

GDP by the expenditure approach adds up all final spending on goods and services produced within a country in a given period. It works because every dollar spent on final output becomes income for someone in the economy, so total spending should match total production when measured correctly. Imports are subtracted because they were produced abroad, while exports are added because they were produced domestically but bought by foreigners.

Use this formula when you need to calculate or interpret a country's GDP from spending data such as household consumption, business investment, government purchases, and trade figures. It is also useful for comparing how much of economic activity comes from consumers, firms, the public sector, and foreign demand.

• Forgetting to subtract imports from exports
• Counting intermediate goods instead of only final goods and services
• Confusing government spending with all government activity, including transfer payments