GDP (Expenditure)

This formula measures an economy’s total output by adding up all final spending on goods and services produced within the country. It works because every dollar of final expenditure becomes income for someone involved in production, so consumption, investment, government purchases, and net exports together account for the value of what is made. Imports are subtracted because they are produced abroad, so they should not be counted as domestic output.

Use this when you need to calculate or interpret GDP from the spending side, especially in macroeconomics, national accounts, or policy analysis. It is also useful for comparing which parts of the economy are driving growth or recession.

• Adding imports instead of subtracting them from exports
• Using intermediate goods or raw transactions instead of final spending
• Forgetting that GDP counts domestic production, not total spending on all goods including imports