Question

“While estimating Gross Domestic Product (GDP) by expenditure method, entire focus is on expenditures incurred by the residents of the country.” Do you agree with the given statement? Give valid reason in support of your answer.

Options

• Agree

• Disagree

Answer 1

No, I don't agree with the given statement.

Reasons:

1. GDP includes a country's ultimate expenditure on consumption and investment within its borders.
2. Domestic boundaries involve both the residents and non-residents.
3. Non-residents also participate to the value addition or production process within a country's domestic boundary.
4. For example, a Samsung plant in India manufactures mobile phones and LEDs. As a result, final expenditure on items made in India will be included part of India's GDP regardless of whether they are created by non-residents.
5. It is included in GDP since it produces jobs within a country's borders.