Unformatted text preview: ated as total net exports spending divided by GDP or X/Y. Government purchases share: the proportion of GDP that is used for government purchases. It is calculated as total government spending divided by GDP or G/Y. 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 If One Share Goes Up, Another Must Go Down The spending shares equation illustrates a simple but important point: That the shares must sum to 1 means that if one share goes up, one or more of the other shares must go down. History of Spending Shares in GDP Defining the Spending Shares
Notes: 1. C/Y is the largest spending share throughout the whole period. 2. X/Y is the smallest spen...
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