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Remember, GDP also accounts for the total amount of money the country’s citizens spent on goods and services. But if inflation increased dramatically at the same time, it could mean the country produced the same amount but prices went up significantly. So if nominal GDP increased from one year to the next, it may seem like the country produced more goods and services. This is GDP that doesn’t account for inflation. The formula listed above represents what economists call nominal GDP. And a closer look can tell us more about a country’s economy and the state of its working class. In the most general sense, a high GDP represents a growing economy where people are making more and spending more.īut there are many ways to analyze GDP. Personal consumption expenditures account for about 70% of the nation’s GDP. In 2017, these components for GDP in the United States mounted to $19.485 trillion. So when you combine the pieces of GDP, you get the following formula: GDP = C + G + I + NX. Net Exports: exports minus imports (NX).
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Personal consumption expenditures: Total amount of money citizens spend on goods and services (C).Below, we explain each of these parts as well as the letter each represents in the formula for GDP: Because GDP represents the total economic output of a country, it involves several moving parts.
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