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This paper examines the relationship between the development expenditure, investment and trade balance in relation to Gross Domestic Product (GDP). The study applied the simultaneous equation model, in particularly two-stage least squares method (TSLS) estimation method. The result showed that Investment (I) and Trade Balance (TB) are the most important variables determine the GDP. In determine the level of investment, it appear that GDP and Trade Balance (TB) are the important factors. GDP and investment are the important factors determine the amount of trade balance (TB).

Keywords: Gross Domestic Product, Development Expenditure, Investment, Trade Balance, Simultaneous Equation

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