Question

1) List the components of GDP in the output (expenditures) approach.

2) Please calculate the growth rate based on the following information:

U.S. GDP 2019 = 19.1 trillion dollars

U.S. GDP 2018 = 18.9 trillion dollars

U.S. GDP 2017 = 18.7 trillion dollars

What is the growth rate between 2017 and 2019?

What is the growth rate between 2018 and 2019?

3) Using the GDP Deflator, calculate the following in (B) billions:

Consumer Government Investment Net Exports

2019: Q P Q P Q P Q P

10 B $6.00 20 B $3.00 15 B $8.00 -3 B $10.00

2018: Q P Q P Q P Q P

8 B $7.00 18 B $4.00 12 B $7.00 -2 B $12.00

What is the GDP Deflator?

4) Give an estimate of actual 2019 GDP for Vietnam, Indonesia, Brazil and Russia, and compare it to the U.S. What is your analysis?

Answer 1

Ans 1.

GDP by Expenditure Method = Household consumption + Gross Business Investment + Government Spending + Net Exports (Export - Import)

Components of GDP by expenditure method

1 Household Consumption - The household consumption is the largest component in GDP contribution. Household consumption mainly accounts higher than 50 % in overall GDP. Household consumption falls under following categories: durable goods, non-durable goods, and services.

2 Investment - It includes investment in the economy which result in asset creation. Machinery, equipment, Buildings, land and household purchase of Houses, changes in inventory are all included in Investment component. Financial and capital market transactions are not part of investments.

3 Government Spending - Government spending refers to the expenditure of government on goods and services. It includes salary and wages of government employees, public and defence spending, infrastructure spending all comes under Government spending. Here Transfer payments are not included in Government spending, they are included in Consumption when these payments are spend in the economy.

4 Net exports - Net exports refer to the difference between country Exports less imports. The Exports are added to the GDP and imports are deducted from GDP.