2. FOUR Expenditure Components of
GDP
1. Personal Consumption Expenditure
(consumption or C)
The total amount of spending by consumer on
durable goods, nondurable goods, and services in
a given period of time.
3. THREE CATEGORIES (C)
i. Durable Goods - commodities that can be stored or
inventoried, that last three years or more, such as
automobiles, appliances, & furniture.
ii. Non-Durable Goods - commodities that last less
than three years and may be consumed very quickly,
such as gasoline, food, & clothing.
Iii. Services - non-commodity items, such as utilities, public
transportation, education, medical care, & recreation.
4. 2. Gross Private domestic investment
(investment or I)
The total amount of spending on non residential
structures, equipment, and software; residential
structure; and business inventories in a given
period of time.
5. THREE CATEGORIES (I)
i. Nonresidential or business - fixed investments the
spending on structures, equipment, and software that
provide the industrial capacity to produce goods and
services for all sectors of the economy.
ii. Residential fixed investments - the spending on
newly constructed housing units, major alterations of and
replacements to existing residential structure and brokerβs
commissions on the sale of new & existing housing.
Iii. Change in business inventories - change in the
amount of goods produced, but not sold in a given
year.
6. 3. Government consumption expenditures &
gross investment (government or G)
The total amount of spending by federal, state, and
local government purchases of finished products
plus all direct purchases of resources.
7. TWO CATEGORIES (G)
i. Consumption - current outlays for goods and services and
depreciation charges for existing structures and
equipment.
ii. Investment - capital outlays for newly acquired structures
and equipment
8. 4. Net export spending. (Export spending
minus Import spending or F = X - M)
The difference between spending by other countries on
domestically produced goods and services (export
spending) and spending by domestic residents on
goods and services produced in the rest of the world
(import spending).
Net export spending can be either positive or
negative depending on the balance between exports
and imports.
9. Present data of real GDP (in real terms, not in current
prices) in the Philippines 2011, 2012, and 2013 and
give the percentage distribution of the 4 GDP
expenditure components.
10.
11. Why do GDP and GNP differ? Is this difference significant
in the Philippines for 2011, 2012, and 2013? Is GDP a
better measure of our economyβs total output than GNP?
β’ Gross Domestic Product (GDP) is the total market value of
a countryβs output.
GDP is concern about the Border.
β’ Gross National Product (GNP) is the total market value of
all final goods and services produced within a given period
by factors of production owned by a countryβs citizens,
regardless of where the output is produced. Also called as
Gross National Income (GNI).
GNP is concern about the Producer.
12. GDP is a better measure of
economyβs total output!
13. How does nominal GDP differ from real GDP?
Which is a better measure of the growth of the
economy and why?
Nominal GDP - The value of currently produced final goods
and services measured in current year prices.
Real GDP - The value of currently produced final goods and
services measured in constant prices, or nominal GDP
adjusted for price level change.
14. Real GDP is a better measure of growth of the economy.
Because increases in Real GDP represent larger amount of
goods and services available for the individuals in the
economy, while increases in Nominal GDP could increase
solely from an increase in price level without any increases
in goods and services.
15. Define economic well being β give at
least 4 definitions of economic well being.
1. Economic well being is the act of ensuring that all young people
are able to access appropriate education, employment and
training opportunities and make progress.
2. It ensures that all young people are equipped with essential life
skills and have support to move successfully into adulthood and
it also enables children and young people to grow up in
prosperous communities.
3. Economic well being refers to the state of a country's people
being: comfortable, healthy, happy, with low standards of living,
low rate of unemployment, presence of peace, stability and
where the country prospers in all its spheres.
4. The economic well being of a country is determine by GDP, if
the country's GDP falls for 2 consecutive quarter β it is believe
that its economic well being has deteriorated.
16. Explain why or why not GDP and GNP are
good indicators of economic well being.
No. GDP and GNP are not a good measure of
Well Being. These only measures Monetary
Growth, and doesn't take into consideration the
Well Being. Well Being means that along with
money people should also have proper
education, sound health, training, skill etc.
GDP and GNP are mere indicators of growth.
