GDP is broken down into categories of Consumption Investment

GDP is broken down into categories of Consumption, Investment, Governement Expenditures, and Net Exports. What role did each category play in the recent recession and subsequent recovery?

Solution

During the last two quarters of 1990 and the first quarter in 1991, the U.S. economy experienced negative growth.. These three quarters are known as 1990-1991 recession by the National Bureau Of Economic Research,

Impact of consumption ;- The main proximate cause of recession was a \"consumption shock\" a decrease in consumption in relation to its normal determinants.

Impact on investment:- Investment and inventory investment fell during recession.

Impact on net exports:-When the dollar epreciates against the major foreign currencies; the dollar exports increase as U.S. produced goods become cheaper abroad.

Impact on govt. spending:- Govt spending : During recession the govt. spending delined.