GDP Critical Thinking Macroeconomic Data Thesis

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Government spending (G) may include stimulus packages, investments in infrastructure, or defense spending. The taxpayer funds such spending, but also benefits from such spending. By giving people jobs and hiring private contractors, the government generates more wealth. The newly-employed purchase more goods and services, which has an overall positive effect on the economy. For example, even if a citizen is employed at a grocery store, if workers on a government project have more money to spend and buy more food, the grocery store and its employees can become more financially secure, and escape the grip of the recession.

Net exports (X-M) are the fourth and final component of GDP. Net exports constitute "the amount by which foreign spending on a home country's goods and services exceeds the home country's spending on foreign goods and services. For example, if foreigners buy $200 billion worth of U.S. exports and Americans buy $150 billion worth of foreign imports in a given year, net exports would be positive $50 billion" (Net exports, 2009, Investopedia).

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Net exports take into consideration the goods and services produced within the nation, minus the net imports. An employed worker in America may produce goods that are shipped abroad. His or her output is tallied as a part of GDP -- but so is a consumer's fondness for Italian chocolates over American chocolates. The attractiveness of consumption of domestic goods vs. imports is affected by the weakness or strength of the dollar relative to other currencies, as well as favorable trade agreements, tariffs, and other pro-free trade or protectionist policies.

Reference

Kaplan, Jay. (1999, January). Principles of macroeconomics. University of Colorado.

Retrieved October 31, 2009 at http://www.colorado.edu/Economics/courses/econ2020/section6/GDP-components.html

Net exports. (2009). Investopedia. Retrieved October 31, 2009 at http://www.investopedia.com/terms/n/netexports.asp.....

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