University:
Baltimore City Community College
Course:
ECO 201 | The American Economy I: Macroeconomic Theory
Academic year:

2024
Views:

121

Pages:

1
Author:

Danny A.

Charting the Expenditure Components of GNP GNP differ in terms of their stability. Personal consumption expenditures are the most stable component of GNP. Since 1950 annual personal consumption expenditures in the United States have risen quite steadily from about $700 billion to over $2,600 billion per year in 1990 when measured in 1982 dollars to adjust for inflation. The physical quantities of goods and services consumed in the aggregate in the United States have therefore more than tripled since 1950, reflecting a general improvement in the standard of living. The lack of major fluctuation in personal consumption expenditures can be readily seen in the graph in Box 4, which plots personal consumption expenditures over time from 1950 to 1990. The graph in Box 4 also shows government purchases of goods and services over time, measured in 1982 dollars. Noticeable blips in government purchases occur during periods of war, reflecting increases in military purchases. Government purchases increased sharply during the Korean War in the early 1950s and again in the late 1960s during the buildup for the Vietnam War. The two most volatile components of real GNP are investment and net exports. For example, net exports often swing from a positive component of GNP to a negative component. Investment purchases are quite volatile from year to year, often plummeting and then increasing sharply.