ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Government purchases include any spending by federal, state, and local agencies, with the exception of debt and transfer payments such as Social Security. Overall, government purchases are a key component of a nation’s gross domestic product (GDP).

Detailed explanation-2: -Government Purchases (G) = general government consumption plus general government investment. Net Exports (NE) = exports minus imports plus net tourism.

Detailed explanation-3: -Government expenditure in the United States is about 20% of GDP, and includes spending by all three levels of government: federal, state, and local. The only part of government spending counted in GDP is government purchases of goods or services produced in the economy.

Detailed explanation-4: -GDP Formula The formula for calculating GDP with the expenditure approach is the following: GDP = private consumption + gross private investment + government investment + government spending + (exports – imports).