Analyzing Component Contributions to GDP Contraction
Consider the following simplified data for the U.S. economy during the 2009 economic downturn:
| Expenditure Component | Share of Economy (Start of 2009) | Growth Rate (During 2009) |
|---|---|---|
| Consumption (C) | 70% | -2% |
| Investment (I) | 15% | -25% |
| Government Spending (G) | 20% | +3% |
| Net Exports (NX) | -5% | (Improved from -6% to -4%) |
Based on this data, identify which component—Consumption or Investment—made a larger negative contribution to the overall change in economic output. Justify your answer by explaining the role of both the component's growth rate and its share of the economy in your determination.
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Analyzing Component Contributions to GDP Contraction
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- Component X, which constitutes 65% of the total economy, contracted by 3%.
- Component Y, which constitutes 15% of the total economy, contracted by 15%.
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