NECO 2002 Economics · Question 32

The formular used by the Expenditure approach to calculate National income is

Options

A.Y=C + I + X - M –G
B.Y= C + X – M – I + G
C.Y = C + I + G + X – M
D.Y = C – I + X – M + G
E.Y = C + G – X + M – I

Answer: C. Y = C + I + G + X – M

Explanation written with AI and checked against the answer key

Step 1: Analyze the question You are asked for the formula used in the expenditure approach to measuring national income (national output). This approach adds up all spending on final goods and services in the economy.

Step 2: The concept The expenditure approach has these components:

C: Consumption, which is household spending on goods and services
I: Investment, which is spending by firms on capital goods and stock
G: Government spending on goods and services
X: Exports, which is foreign spending on our goods
M: Imports, which is spending on foreign goods and must be subtracted because it is not part of our domestic output
(X – M): Net exports

Step 3: The formula

Y = C + I + G + (X – M)

Step 4: Check the options

A: Subtracts G, which is wrong, since government spending is added.
B: Subtracts I, which is wrong, since investment is added.
C: C + I + G + X – M. This is correct.
D: Subtracts I, which is wrong.
E: Subtracts X and adds M, which is the reverse of the correct treatment, and it also subtracts I.

Answer: C

Tip: Remember it as "C I G X-M". Everything is added except imports (M), which is the only item subtracted. If an option subtracts C, I, or G, or reverses X and M, you can eliminate it right away.

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