Use the information to work on the following problems The Co

Use the information to work on the following problems.

The Commerce Department reported that in December 2015, retail sales rose by 0.2, net exports decreased, inventories held by businesses rose by 0.1 percent, and total sales by businesses fell by 0.6 percent.

Source: Commerce Department, February 2016

Does the statement that total sales by businesses fell by 0.6 percent mean that GDP decreased by 0.6 percent? Explain your answer.

Solution

No, we cannot say that GDP decreased by 0.6 per cent when total sales by businesses fell by 0.6 per cent. This is because Gross Domestic Product of a nation is a vast term and considers changes in various terms and components before we can compute the net change in Gross Domestic Product of a nation. It considers changes in consumption spending, investment spending, government spending, changes in net exports etc before we can come to the conclusion about the net change in the GDP value of a nation.