1Cademy - GDP Expenditure Identity

Formula

GDP Expenditure Identity

The expenditure approach to calculating Gross Domestic Product (GDP) defines it as an accounting identity, summing the total spending on final goods and services in an economy. The components are consumption ( $C$ ), fixed investment ( $I$ ), changes in inventories ( $II$ ), government spending ( $G$ ), and net exports ( $X - M$ ). The identity is expressed as:

$\text{GDP} \equiv C + I + II + G + X - M$

Updated 2026-06-18

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References

CORE Econ - The Economy 2.0: Macroeconomics

Learn After

Applying the GDP Expenditure Identity
A U.S.-based automobile manufacturer produces a car valued at $30,000 in the first quarter but does not sell it by the end of the quarter. According to the expenditure approach for calculating Gross Domestic Product, how is this transaction recorded in the first quarter?
Analyzing a Transaction's Impact on GDP Components
The U.S. government purchases a new fleet of fighter jets from a French manufacturer for $500 million. Based on the expenditure approach to calculating Gross Domestic Product (GDP), what is the net effect of this single transaction on U.S. GDP?