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Unformatted text preview: d annually in the territorial area we
know as the United States. Cynthia’s TV was
not produced in the United States, so it is
not part of U.S. GDP. Spending by
Americans for foreign-produced goods is
called import spending.
To compute U.S. GDP, then, we need to
sum consumption (C), investment (I), government purchases (G), and export spending
(EX), and then subtract import spending
(IM). We can now write GDP in symbol form:
GDP C I G EX IM For example, in the first quarter of 2005,
consumption in the United States was
$8.534 trillion,1 investment was $2.085 trillion, government purchases were $2.260 tril1 import spending
The amount spent by
Americans for foreignproduced goods. lion, export spending was $1.210 trillion,
and import spending was $1.938 trillion.
Thus we can calculate GDP to be $12.151
trillion (see Exhibit 11-6). QUESTION: Earlier you stated that investment is defined as the expenditures
made by the business sector. For example, if a business buys a new machine,
the purchase of the machine is considered an investment. I think in the everyday world people use the word
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- Winter '14