Exports and Imports

• Exports, goods that are produce in the domestic economy and purchased by the foreign sector, is divided into two subcategories in the National Income and Product Accounts: goods and services. Goods are over two-thirds of exports and services are the remaining one-third.

• Imports, goods that are produce in the foreign sector and purchased by the domestic economy, is also divided into two subcategories in the National Income and Product Accounts: goods and services. Goods are about 85 percent of imports and services are the remaining 15 percent.

Subtracting Imports

Personal consumption expenditures, gross private domestic investment, and government consumption expenditures and gross investment are not just expenditures on domestic production. These expenditures also include imports. For example, the purchase of a Hot Momma Fudge Bananarama Ice Cream Sundae by Duncan Thurly, includes both domestic production and imports. The ice cream is produced domestically in Wisconsin. The almond sprinkles come from California. However, the bananas and the chocolate (used for the hot fudge) are imported from South America.

As a matter of fact, a great many of the goods that might seem to be domestically produced use imported components. This means that the official measures of consumption, investment, and government purchases include both domestic production and imports. The problem is determining how much of the production is domestic and how much is imported. This is difficult, at best, and often impossible on a good-by-good case. Fortunately, total imports are known. As such, it is easier to subtract all imports, all at once from total expenditures. This subtraction is conveniently done relative to exports, generating the term net exports.

Three More Expenditures

• Personal Consumption Expenditures: The official measure of consumption expenditures on gross domestic product by the household sector. Personal consumption expenditures average about 65 to 70 percent of gross domestic product. These expenditures come in one of three varieties: (1) durable goods, (2) nondurable goods, and (3) services.


• Gross Private Domestic Investment: The official measure of investment expenditures on gross domestic product by the business sector. Gross private domestic investment averages about 15 percent of gross domestic product. These expenditures come in two broad categories: (1) fixed investment and (2) changes in business inventories.


• Government Consumption Expenditures and Gross Investment: The official measure of government purchases for gross domestic product by the government sector. Government consumption expenditures and gross investment also averages about 15 percent of gross domestic product. These purchases are divided into two groups: (1) federal and (2) state and local.