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Contemporary Economics:
An Applications Approach
By Robert J. Carbaugh
2nd Edition
Chapter 10:
Gross Domestic Product and
Economic Growth
Copyright ©2003, South-Western College Publishing
Gross Domestic Product
International comparisons of GDP
GDP = C + I + G + (X - M)
Gross Domestic Product =
Personal consumption (C)
+ Gross private domestic
investment (I)
+ Government purchases of
goods and services (G)
+ Net exports (exports - imports)
[X-M]
Carbaugh, Chap. 10
Some international comparisons
of GDP, 1999
Nation
GDP
(billions)
GDP
per person*
United States
$8,708.9
$30,600
Switzerland
260.3
27,486
Japan
4,395.1
24,041
Canada
612.0
23,725
Mexico
475.0
7,719
Russia
375.3
6,339
Togo
1.5
1,346
Zambia
3.3
686
Ethiopia
6.5
599
Sierra Leone
0.7
414
* measured at purchasing power parity
2
Gross Domestic Product
Components of US GDP, 2000
Amount
Component of GDP
Disposition of household income
Durable goods
Non-durable goods
Services
(billions)
Percent
of total
$6,757.3
820.3
2,010.0
3,927.0
68%
Gross private domestic investment
Fixed investment (plant, equipment)
Business inventories
1,832.7
1,778.2
54.5
19%
Government purchases of goods
and services
Federal
State and local
1,743.7
595.1
1,148.6
17%
Net exports of goods and services
Exports
Imports
-370.6
1,097.4
1,468.0
-4%
Gross Domestic Product
9,963.1
100
Carbaugh, Chap. 10
3
Gross Domestic Product
Nominal GDP, real GDP, and deflator
Nominal and real GDP, 1990-2000
Real GDP 
nominal GDP
 100
GDP deflator
Carbaugh, Chap. 10
Year
Nominal GDP
(billions)
Real GDP
(billions)
GDP deflator
(1996=100)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
5803.2
5986.2
6318.9
6642.3
7054.3
7400.5
7813.2
8318.4
8790.2
9299.2
9963.1
6707.9
6676.4
6880.0
7062.6
7347.7
7543.8
7813.2
8159.5
8515.7
8875.8
9318.5
86.5
89.7
91.8
94.0
96.0
98.1
100.0
101.9
103.2
104.8
106.9
4
Gross Domestic Product
Economic growth
Rate of growth
Year2 real GDP - Year1 real GDP
Year1 real GDP
8
Japan
14
Canada
Years required to double
GDP, beginning in 1960, for
selected nations
17
Belgium
19
West Germany
24
United States
0
5
10
15
20
25
30
Years
Carbaugh, Chap. 10
5
Economic Growth
Productivity trends
Annual rates of growth in US labor productivity
and real hourly earnings 1960-1999
Year
Labor productivity
growth rate
1960s (avg.)
1970s (avg.)
1980s (avg.)
1990-94 (avg.)
1995
1996
1997
1998
1999
3.2%
1.8
1.2
1.6
0.7
2.8
2.1
2.7
3.1
Real hourly earnings
growth rate
2.9%
1.3
0.2
0.8
-0.4
0.4
0.7
3.9
2.9
Source: Economic Report of the President, 2001; US Dept. of Commerce, Bureau of the Census,
Statistical Abstract of the US
Carbaugh, Chap. 10
6
Economic Growth
Computer technology bolsters US economic growth
Annual contribution to
productivity growth (%)
2.5%
0.25%
Technological Gains: each sector's
contribution to technological gains
31%
Non-information
technology
56%
2.0%
0.99%
1.5%
44%
Computers
32%
0.36%
1.0%
14%
0.37%
Software
1.13%
0.5%
8%
0.64%
11%
0.0%
Communications
1990-95
1995-98
Labor quality
T echnological gains
Capital investment per hour
Carbaugh, Chap. 10
0%
4%
20%
40%
60%
1990-95 1995-98
7
Economic Growth: Role of Government
Research & Development Expenditures as a share of GDP, 1998
2.6%
United States
2.1%
2.8%
2.7%
Japan
2.3%
2.2%
Germany
2.3%
France
2.0%
1.9%
United Kingdom
1.7%
1.1%
1.0%
Italy
0%
1%
Source: US Dept. of Commerce, Bureau of the
Census, Statistical Abstract of the US, 2000
Carbaugh, Chap. 10
1%
2%
2%
3%
3%
T otal Non-defense
8
Economic Growth: Role of Government
Impact of education, trade and infrastructure
Impact of education, openness to
trade, and telecommunications
infrastructure on economic growth
in seventy-four countries, 1965-95
Growth of GDP per Capita
(percent per year)
3.8
4
3.2
3.5
3
2.5
2
1.5
1
0.6
High
0.5
0
-0.1
High
Low
Openness to trade,
supply of telecom
infrastructure
Low
Education
Source: World Bank, World Development Report, 1999
Carbaugh, Chap. 10
9