3. Consider the following information about the contributions of specific GDP it
ID: 1137075 • Letter: 3
Question
3. Consider the following information about the contributions of specific GDP items to total change in US GDP in 2018. (5 Points) Table 1: Contributions to Percent Change in Real Gross Domestic Product 2018 Q1 -0.13 1.12 0.3 0.05 -0.14 -0.06 0.11 0.22 GDP Item Q2 Personal Consumption Expenditures in Goods Imports of Goods Residential Fixed Investment Federal Spending in National defense Nonresidential Fixed Investment Federal Spending in Nondefense Exports of Goods Personal Consumption Expenditures in Services Change in private inventories Exports of Services State and local Government spending Imports of services 1.47 1.13 0.06 0.01 0.26 1.03 0.49 1.43 0.27-0.97 0.180.07 0.1 0.17 0.15 0.02 Source: Bureau of Economic Analysis, Table 1.1.2 a) b) c) d) What was the contribution of Consumption to total GDP growth in 201802? What was the contribution of Investment to total GDP growth in 201802? Did Government Spending provide a boost to total GDP growth in 201802? Of how much? Did Imports of Goods & Services contributed positively or negatively to total GDP in 2018Q2? How about Exports? e) What was the annual rate of real GDP growth in the U.S. in 201802?Explanation / Answer
a) Contribution of consumption to total GDP growth (C) = Personal Consumption Expenditure in Goods + Personal Consumption Expenditure in Services = 1.12 + 1.43 = 2.55
b) Contribution of Investment to total GDP growth (I) = Residential Fixed Investment + Nonresidential Fixed Investment + Change in Private Inventories = (-0.06) + 1.13 + (-0.97) = 0.10
c) Government Expenditure (G) = Federal Spending in National Defense + Federal Spending in Nondefense + State and local government spending = 0.22 + 0.01 + 0.17 = 0.40
Yes, the government spending did provide a boost to total GDP growth. However, this was largely due to increase in the federal government's expenditure on defense and the spending done by the state and local governments. There was minimal or no increase in the expenditure by the Federal government on non defense areas.
d) Net Exports (N) = Exports - Imports
Import of goods & services contribute negatively to total GDP as any amount of goods or services that are imported in a given financial year is deducted from the GDP.
On the other hand, exports contribute positively to total GDP.
Total Imports = Imports of Goods + Imports of Services = 0.05 + 0.02 = 0.07
Total Exports = Exports of Goods + Exports of Services = 1.03 + 0.07 = 1.10
Net Exports (N) = Total Exports - Total Imports = 1.10 - 0.07 = 1.03
e) GDP = C+I+G+N = 2.55 + 0.10 + 0.40 + 1.03 = 4.08
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