How this calculator works
The expenditure approach adds up what final users spend in an economy: households consume, firms invest, governments purchase goods and services, and the rest of the world buys exports. Imports are subtracted because they were produced abroad, so counting them inside domestic spending would overstate what the economy produced. The result is gross domestic product at market prices, before deductions for the wear and tear of capital, which gives net domestic product. Statistical agencies adjust these components for inventory changes and statistical discrepancies that this simple identity ignores.
Formula
GDP = C + I + G + (X - M). C is household consumption, I is investment, G is government purchases, X is exports and M is imports. Solving for a component rearranges the identity, for example C = GDP - I - G - X + M. Net exports are X - M.
Worked example
Consumption of $1,200, investment of $400, government purchases of $300, exports of $250 and imports of $280 give GDP of $1,870 and net exports of -$30, so trade is -1.6043% of GDP.
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Frequently asked questions
Why are imports subtracted?
Imports are part of consumption, investment and government spending but were not produced domestically. Subtracting them leaves only the value added inside the economy.
Does this include transfer payments?
No. Pensions, unemployment benefits and similar transfers move money between people without producing goods or services, so they are not government purchases in the GDP accounts.
Is this nominal or real GDP?
It is nominal when you enter current-dollar components. To remove the effect of price changes, divide by a GDP deflator or enter the components already measured in constant dollars.