13-6 10 THE COMPONENTS OF GDP GDP ()is the sum of the following: Consumption (C) -Investment 1) Government Purchases (G) -Net Exports NX) Y=C+I +G+NX where Y=GDP the value of total output C+I +G NX aggregate expenditure Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 13-6 THE COMPONENTS OF GDP • GDP (Y) is the sum of the following: – Consumption (C) – Investment (I) – Government Purchases (G) – Net Exports (NX) Y = C + I + G + NX where Y = GDP = the value of total output C + I + G + NX = aggregate expenditure
13-7 490 THE COMPONENTS OF GDP(1) Consumption (C): The spending by households on goods and services,with the exception of purchases of new housing ·durable goods last a long time ex:cars,home appliances ●non-durable goods last a short time ex:food,clothing ●services work done for consumers ex:dry cleaning, air travel. Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 13-7 THE COMPONENTS OF GDP(1) • Consumption (C): – The spending by households on goods and services, with the exception of purchases of new housing. • durable goods last a long time ex: cars, home appliances • non-durable goods last a short time ex: food, clothing • services work done for consumers ex: dry cleaning, air travel
13-8 0 THE COMPONENTS OF GDP2) Investment (I): -The spending on capital equipment,inventories,and structures, including new housing. Includes: .business fixed investment spending on plant and equipment that firms will use to produce other goods services .residential fixed investment spending on housing units by consumers and landlords inventory investment the change in the value of all firms'inventories Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 13-8 • Investment (I): – The spending on capital equipment, inventories, and structures, including new housing. Includes: • business fixed investment spending on plant and equipment that firms will use to produce other goods & services • residential fixed investment spending on housing units by consumers and landlords • inventory investment the change in the value of all firms’ inventories THE COMPONENTS OF GDP(2)
190 13-9 Net vs.Gross Investment Net investment is positive when the nation is producing more capital goods than are currently being used up in the form of depreciation. Since depreciation is hard to estimate accurately,statisticians have more confidence in their measures of gross investment than in those of net investment. Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 13-9 Net vs. Gross Investment • Net investment is positive when the nation is producing more capital goods than are currently being used up in the form of depreciation. Since depreciation is hard to estimate accurately, statisticians have more confidence in their measures of gross investment than in those of net investment