Question

Assess current trends in GDP and its components.

Answer 1

The four components of gross domestic product are personal consumption, business investment, government spending, and net exports

Personal consumption- Consumer spending accounts for nearly 70 per cent of total production in the United States. That was $13.28 trillion in the year 2019. Goods are objects of tangible value. They are further subdivided into two components which are even smaller. The first is durable goods, like automobiles and furniture. Those are items that have three or more years of useful life. The second is non-lasting products, including fuel, food , and clothing. The retailing industry is a vital component of the economy because it provides the customer with all these goods.

Business investment- The investment in business includes the purchases made by companies to produce consumer goods. But not all transactions are counted. If a purchase only replaces an existing item, it will not add to GDP, and will not be counted. Purchases must be counted towards creating new consumer goods. Enterprise investments were $3.42 trillion in 2019. That's U.S. 18 per cent. GDP. In 2009 it was doubling its $1.5 trillion low recession. In 2014 it beat its $2.3 trillion peak of 2006. The BEA divides company investment into two sub-components: Capital investment and Private Inventory Transition.

Government Spending- Government spending in 2019 amounted to $3.30 Trillion. That's 17 per cent of GDP overall. That's less than the 19 per cent in 2006 that it contributed. In other words, when the economy boomed before the recession the government was spending more. In 2019 the federal government was spending $1.28 trillion. Military spending was more than 60 per cent. Contributions from state and local government were 11 percent. While this spending has risen a bit since 2017, other economic sectors have expanded more rapidly.

Net Exports of Goods and Services- Imports and exports affect GDP in the opposite way. Exports add to GDP, and subtract imports. The US imports more than it exports, thereby building a trade deficit. Despite gains in domestic shale oil production, America still imports much petroleum.

Services can be hard to export. Imports subtracted $3.49 trillion in 2019, or a little more than they did in 2018. Exports added $2.53 trillion, roughly the same as those in 2017 and 2018. As a result , foreign trade subtracted $950bn from GDP, subtracted more than $920bn in 2018, from the $859bn it subtracted in 2017.