REAL VERSUS NOMINAL GDP

REAL VERSUS NOMINAL GDP As we have seen, GDP measures the total spending on goods and services in all markets in the economy. If total spending rises from one year to the next, one of two things must be true: (1) the economy £’s producing a larger output of...

THE COMPONENTS OF U.S. GDP

THE COMPONENTS OF U.S. GDP Table 1 shows the composition of U.S. GDP in 2004. In this year, the GDP of the United States was almost $12 trillion. Dividing this number by the 2004 U.S. population of 294 million yields GDP per person (sometimes called GDP per capita)....

NET EXPORTS

NET EXPORTS Net exports equal the purchases of domestically produced goods by foreigners (exports) minus the domestic purchases of foreign goods (imports). A domestic firm’s sale to a buyer in another country, such as the Boeing sale to British Airways,...

GOVERNMENT PURCHASES

GOVERNMENT PURCHASES Government purchases include spending on goods and services by local, state, and federal governments. It includes the salaries of government workers and spending on public works. Recently, the income accounts have switched to the longer label...

INVESTMENT

INVESTMENT Investment is the purchase of goods that will be used in the future to produce more goods and services. It is the sum of purchases of capital equipment, inventories, and structures. Investment in structures includes expenditure on new housing. By...

CONSUMPTION

CONSUMPTION Consumption is spending by households on goods and services. Goods include household spending on durable goods, such as automobiles and appliances. and nondurable goods, such as food and clothing Services include such intangible items as haircuts and...