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Where does Tax Revenue apply in the GDP formula?

Question:

Where does Tax Revenue apply in the GDP formula?

GDP

GDP is the overall production of goods and services over a period of time. With the increase in production of goods and services the economy is able to grow and thus, there is overall economic development .

Answer and Explanation:

Since formula for GDP is

GDP = C+ I+ G+(X-M)

Where C is the consumption by the people,

I is the investment made by the people,

G is the government spending by the government on the public,

(X-M) is the net exports of the country, which mean the difference between the imports and exports of the country.

Tax revenue is applied as G (government spending) in the GDP formula. Tax revenue is not directly applied in the GDP formula; it is a part of government spending as it is the money received to the government from the people of the country in form of taxes.


Learn more about this topic:

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Overview of the Gross Domestic Product

from CLEP Social Sciences and History: Study Guide & Test Prep

Chapter 59 / Lesson 2
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