Ch 7

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Unformatted text preview: Spending Shares GDP is divided into four components: consumption (C), investment (I), government spending (G), and net exports (X). Y = C + I + G + X Defining the Spending Shares Algebraically: Y = C + I +G+ X Dividing both sides by Y: Y C I G X = + + + Y Y Y Y Y C I G X 1= + + + Y Y Y Y Defining the Spending Shares Consumption share: the proportion of GDP that is used for consumption. It is calculated as total consumption spending divided by GDP or C/Y. For example: C $6T = = 0.6 Y $10T If C = $6 trillion and Y = $10 trillion, then Defining the Spending Shares Investment share: the proportion of GDP that is used for investment. It is calculated as total investment spending divided by GDP or I/Y. Net exports share: the proportion of GDP that is used for net exports. It is calcul...
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This note was uploaded on 06/01/2010 for the course ECONOMICS STA2012 taught by Professor Fan during the Spring '10 term at A.T. Still University.

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