International Finance Theory and Policy
by Steven M. Suranovic

Finance 5-4 ('96-'97)

The US National Income Statistics (1996-1997)

The following table contains US statistics for the national income and product accounts for the years 1996 and 1997. The information source on the web is: as of April 1998. The table provides the numerical breakdown of GDP not only into its broad components (C,I,G, etc.) but also into their major subcategories. Thus, as an example, consumption expenditures is broken into three main subcategories, durable goods, non-durable goods and services. The left hand column indicates which value corresponds to the variables used in the identity.


US Gross Domestic Product

(billions of dollars)

    1996 1997 1997

% of GDP

GDP Gross domestic product 7,636.0 8,081.0 100.0%
C Personal consumption expenditures 5,207.6 5,488.1 67.9%
  Durable goods 634.5 659.1 8.1%
  Nondurable goods 1,534.7 1,592.1 19.7%
  Services 3,038.4 3,236.9 40.1%
I Gross private domestic investment 1,116.5 1,240.9 15.4%
  Nonresidential 781.4 845.4 10.5%
  Structures 215.2 229.9 2.8%
  Producers' durable equipment 566.2 615.5 7.6%
  Residential 309.2 327.2 4.0%
  Change in business inventories 25.9 68.3 0.8%
G Government consumption expenditures and gross investment 1,406.7 1,452.7 18.0%
  Federal 520.0 523.8 6.5%
  National defense 352.8 350.4 4.3%
  Nondefense 167.3 173.4 2.1%
  State and local 886.7 928.9 11.5%
EX Exports 870.9 958.0 11.9%
  Goods 617.5 686.5 8.5%
  Services 253.3 271.5 3.4%
IM Imports 965.7 1,058.8 13.1%
  Goods 809.0 888.7 11.0%
  Services 156.7 170.0 2.1%

There are a number of important things to recognize and remember about these numbers.

First, it is useful to know that US GDP in 1997 is around $8 trillion, (or $8,000 billion). This is measured in 1997 prices, thus it is referred to as nominal GDP. This number is useful to recall, first because it can be used in to judge relative country sizes if you happen to come across another country's GDP figure. Also, the number will be useful in comparison with US GDP in the future. Thus, if in 2010 you read that US GDP is $20 trillion, you'll be able to recall that back in 1997 it was just $8 trillion. Also note that between 1996 and 1997, the US added over $400 billion to GDP This would suggest that if US growth rates and price inflation remains about the same, US GDP should be above $10 trillion within 5 years.

The next thing to note about the numbers is that consumption expenditures is the largest component of US GDP, making up almost 68% of output in 1997. That percentage is relatively constant over time, even as the economy moves between recessions and boom times. Also notice that services is the largest sub-category in consumption. This category includes health care, insurance, transportation, entertainment, etc.

Gross private domestic investment, investment for short, accounted for just over 15% of GDP in 1997. This component of GDP is often the target of considerable concern in the US. Investment represents how much the country is adding to the capital stock. Since capital is an input into production, the more capital equipment available, the greater will be national output. Thus, investment spending is viewed as an indicator of future GDP growth. Perhaps, the higher is investment, the faster the economy will grow in the future.

One concern about the US investment level is that as a percentage of GDP, it is lower than in many countries in Europe and especially in Japan. In many European countries it is above 20% of GDP. In Japan the investment figure is closer to 30%. There was a fear amongst some observers, especially in the 1980s and early 90s, that lower US investment, relative to the rest of the world, would ultimately lead to slowber growth.

That this projection has not been borne out, especially in light of Japan's almost non-existent GDP growth during the 1990s, should indicate that higher investment is not sufficient to assure higher growth.

Government expenditures on goods and services in the US amounted to 18% of GDP in 1997. Recall that this figure includes, state, local and federal spending but excludes transfer payments. When transfer payments are included, government spending plus transfers as a percentage of GDP exceeds 30% in the US.

Two things are worth noting. First, note that state and local spending is almost twice the level of federal spending. Second, most of the federal spending is on defense related goods and services.

Exports in the US accounted for just under 12% of GDP in 1997 and is approaching the $1 trillion level. Imports into the US are just over $1 trillion and amounts to just over 13% of GDP. In terms of the dollar value of trade, the US is the largest importer and exporter of goods and services in the world. However, relative to many other countries, the US trades less as a percentage of GDP.

International Finance Theory and Policy - Chapter 5-4: Last Updated on 8/15/98