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Aggregate Demand Declines in 2001

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THE RECESSION OF 2001â?"WHICH COMPONENT OF AD DECLINED THE MOST? Use the interactive feature of the Bureau of Economic Analysis Web site, www.bea.gov, to access the National Income and Product Account Tables. Select Interactive Data Tables, which is listed under Publications. On that page, select National Income and Product Accounts. Go to the List of All NIPA Tables and then find Table 1.1.6, which will give you access to real GDP figures for the U.S. economy. From Table 1.1.6 find the levels of real GDP, personal consumption expenditures (C), gross private investment (Ig), net exports (Xn), and government consumption expenditures and gross investment (G) in the first and third quarters of 2001. By what percentage did real GDP decline over this period? Which of the four broad components of aggregate demand decreased by the largest percentage amount?

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Solution Summary

Analysis of the decline in AD curing the recession of 2001.

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This seems to be a trick question, because real GDP did not decline over this period. From Table 1.1.6 I found this data for 2001:

1 Gross domestic product
first quarter: 11,297.2
third quarter: 11,380.1
difference: + 82.9

2 Personal consumption expenditures
First quarter: 7,744.3
Third quarter: 7,807.7
difference: +63.4

7 Gross private ...

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