Domestic Spending:Real GDP has four components:
1. Consumption spending (C)
2. Investment spending (I)
3. Government purchases (G)
4. Net exports, the balancing item (NX).
These four components add up to national income that according to the circular-flow principles is the similar as real GDP, Y:
C + I + G + NX = Y
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After decided on the point at which revenue is recognised, we can now twist to the subject of the recognition of expenses. The relevant convention in accounting is intended to give guidance regarding the recognition of expenses.
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