Which formula correctly represents the calculation of GDP?

The correct formulation for calculating Gross Domestic Product (GDP) is indeed represented by the equation GDP = C + I + G + (X - M).

In this formula, C represents consumption, which includes all private expenditures by households. I is investment, referring to business expenditures on capital goods that are used for future production. G stands for government spending on goods and services.

The term (X - M) accounts for net exports, where X represents exports (goods and services produced domestically and sold abroad), and M denotes imports (goods and services produced abroad and purchased domestically). By subtracting imports from exports, you get the net effect of international trade on the economy's GDP.

This formula effectively captures the total output of an economy by considering all domestic production and the net effect of foreign trade, thus allowing for a comprehensive view of economic activity.