Discussion
In an open economy, GDP is the sum of
Answer: A
GDP in an open economy is the sum of consumption, gross investment, government spending and net exports.
This is the expenditure method:
\[ \text{GDP} = C + I + G + (X - M) \]
Investment is taken gross, including the replacement of worn-out capital, because GDP is a gross measure; using net investment would give net domestic product instead. Exports must be net of imports, since spending on imports is not domestic production, so 'gross exports' is wrong. Wages, rent, interest, profit and depreciation describe the income method, and as listed they leave out indirect taxes less subsidies.
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