Country X uses the expenditure approach in the determination of its national income. Outline five macro-economic expenditure categories that should be included in the approach. (10 marks)November 2022

The expenditure approach to determining national income, also known as the GDP (Gross Domestic Product) approach, measures the total value of all final goods and services produced within a country in a given period of time. The expenditure approach includes the following macro-economic expenditure categories:

1. Personal consumption expenditure (C): this includes all goods and services purchased by households for personal consumption.
2. Gross private domestic investment (I): this includes all spending on fixed assets such as buildings, equipment, and inventory by firms.
3. Government consumption expenditure and gross investment (G): this includes all spending on goods and services by the government, including wages, salaries, and purchases of goods and services.
4. Net exports (X-M): this is the difference between exports (X) and imports (M) of goods and services. Exports represent spending by foreigners on domestically-produced goods and services, while imports represent spending by domestic residents on foreign-produced goods and services.