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G in GDP component

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3. Does the G in C + I + G + NX represent government spending (total government expenditures) or government purchase? How do government purchases and government spending differ? Does G include government investment?

4. Does the I in C + I + G + NX include purchases of stocks and bonds? Why or why not?

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Solution Preview

3. The G in the formula: Y = C + I + G + NX represents Government purchases.
Government purchases include spending on goods and services by local, state and federal governments and gross investment in highways, bridges etc.
Government purchases Vs. Government spending:
• Government purchase is a narrower definition than government ...

Solution Summary

This solution discusses government purchases and government spending, and the differences between both.

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