GDP Breakdown

Question 1

Final goods

Answer 1

Those that are actually sold to consumers - not producers.

Question 2

What are the four categories in GDP?

Answer 2

Consumer Spending (C), Investment Spending (I or Ig), Government Spending (G), Net Exports (X - M)

Question 3

Consumer Spending

Answer 3

Largest part of GDP, comprises of consumer spending on items such as new cars, food, haircuts, gas, education, etc.

Question 4

Investment Spending

Answer 4

Spending to increase productivity or output in an economy. Includes the market value of products that are built but not sold (changes in business inventories)

Question 5

Changes in Business Inventories

Answer 5

When products are sold, the difference between the inventory value and selling price is added to or subtracted from the GDP.

Question 6

If total output exceeds current sales,

Answer 6

unsold inventories will increase GDP. increasing inventories prefer decreases in production.

Question 7

Government Spending

Answer 7

Spending on everything from infrastructure to national defense (except transfer payments such as student aid or unemployment)

Question 8

Net Exports (X-M)

Answer 8

Exports (X) minus imports (M)

Question 9

Aggregate Income Formula

Answer 9

C + Ig + G + (C - M) = GDP