Editing Macroeconomics (section)

=== GDP Equation Using Expenditure Approach ===
One way to calculate Gross Domestic Product, or total net output, is the expenditure method. The GDP essentially tells you how big the economy is. The larger the GDP value, the bigger the economy. The expenditure approach involves looking at four main components: Consumer Spending, Government Spending, Investment Spending, and Net Exports.<ref>{{Cite web |title=Calculating GDP With the Expenditure Approach |url=https://www.investopedia.com/ask/answers/070615/how-do-you-calculate-gdp-expenditures-approach.asp |access-date=2025-02-25 |website=Investopedia |language=en}}</ref> Consumer Spending is made up of ordinary consumers spending money on different kinds of products and also investing their money in residential markets. Government Spending involves the government spending money on goods and services and they may assist consumers or businesses with spending as well. For instance, purchasing physical capital for businesses. While transfer payments, which includes things like welfare or social security payments), are things that a government pays, it is not included in the final calculation of the expenditure approach because it is not paying for any final goods and services. Investment spending involves businesses spending money on physical capital/equipment to help with producing goods and services. Lastly, net exports is just exports minus imports. Exports are goods and services that a country is selling to people abroad and imports are goods and services that people from a country are receiving from abroad.

Hence, the equation for the expenditure approach to calculating the Gross Domestic Product is

[[Gross domestic product|GDP]] = Consumer Spending(CS) + Government Spending(GS) + Investment Spending(IS) + Net Exports(EXP-IMP).