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Data Exercise #1
University of Maryland Global Campus
ECON 201: Principals of Macroeconomics
Professor Claudia Araiza
April 3, 2022
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Data Exercise #1
Part 1: Expenditures Approach to Calculating GDP
Table 1:
Nominal GDP Data
Categories Q4 Nominal Data % Change
Gross Domestic Product 24,002.80
Personal consumption expenditures 16,314.20 68%
Gross private domestic investment 4527.2 19%
Net exports of goods and service -971.4 -4%
Government consumption Exp & Inv 4,132.90 17%
Real GDP Data
Categories Q4 Real Data % Change
Gross Domestic Product 19,806.30
Personal consumption expenditures 13,818.40 70%
Gross private domestic investment 3,903.00 20%
Net exports of goods and service -1,350.10 -7%
Government consumption Exp & Inv 3,359.00 17%
The table above illustrates the differences between Nominal GDP and Real GDP
according to the Bureau of Economic Analysis. The categories listed represent a summary of
changes in household expenditures, investments, exports, and federal spending on defense and
local governments. According to the BEA, GDP increased at an annual rate of 6.9 percent in the
fourth quarter of 2021 compared to 2.3 percent in the previous quarter. (Rohrer, 2021).
At first glance, Nominal GDP appears higher than Real GDP because it accounts for
current quantities of products sold at current year prices produced within the borders of the U. S.
However, Real GDP accounts for inflation by comparing prices to a base years prices. This
adjustment for price fluctuations provides a more accurate representation of the country’s
productivity, which accounts for the $4.1 trillion dollar decrease. Personal consumption
expenditures make up the largest category of GDP and reflects consumer spending. The least
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amount of GDP comes from net exports of goods and services. This is because the U.S imports
more goods than it exports, and its value of imports exceeds the value of exports. (Greenlaw,
2017).
Gross private domestic investments represent investments made by businesses within the
U.S and measures the amount of money invested. GPDI is an important clue for economists and
represents whether the economy is growing or constricting. Lastly, government consumption
expenditures and gross investments (GCE) represents government purchases used to support
government functions like national defense. In Q3 2022, the U.S spent approximately $911
billion on national defense and in Q4 2022, national defense was 22% of the nominal (GCE).
Overall, national defense spending amounted to roughly 3.7% of the U.S GDP.
The latest data shows the economy continues to grow with 19 of 22 industry groups
contributing to the fourth-quarter increase in real GDP. (Rohrer, 2021). As of now, the current
economic climate faces challenges such as supply chain disruptions, inflation well above the 2%
benchmark, Covid-19 recovery, and international trade sanctions. Experts forecast that US Real
GDP growth will slow to 1.7 percent (quarter-over-quarter, annualized rate) in Q1 2022, vs. 7.0
percent growth in Q4 2021. (TCB, 2022).
Learning how to analyze and interpret the latest GDP data was challenging, informative
and rewarding. This exercise showed me the many different sectors of our economy, how to
calculate them and why it’s important to know the difference between the Nominal and Real
GDP. I was not aware of the Bureau of Economic Analysis and their comprehensive collection
of economic accounts. With this information I feel more confident in my career as a Realtor, and
helping guide my clients in making a sound financial purchase of a new home.
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Data Exercise #1
Part 2: Income Approach to Calculating GDP
Table 2:
Categories Q4 Data
Gross domestic product 24002.8
Gross national product 24279.7
Net national product (GNP-
Consumption of fixed capital) 20,267.90
National income 20813.7
Personal income 20947.7
Personal Disposable Income 18202.8
Personal Savings 1394.4
Gross domestic product and gross national product are both indicators of how a country’s
economy is performing and represent the value and quantity of goods and services produced over
a period of time. The difference being GDP is concerned with where the goods and services are
performed, for instance within the borders of the U.S. Whereas, GNP measures the labor of
goods in services supplied by U.S residents. For example, an American company can operate
overseas and its profits would not be calculated in GDP but a portion of it would be factored in
GNP. The best way to describe how to calculate the difference of GDP and GNP is by using a
formula. GNP = GDP + Net Income from Overseas – Net Income Outflow to Foreign Countries
and GDP = Consumption + Investment + Government Expenditure + Exports – Imports.
National income (NI) is all of the money made by residents of a country and measures the
monetary value of income earned from wages, interest, investments, rent, and entrepreneurial
ventures. In Q4 of 2022, Table 2 shows GNP exceeded NI by $3,466 trillion. Out of the ten
categories that make up NI, compensation of employees is the largest portion and made
approximately $13,061.4 trillion. In order to separate the difference from personal income from
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national income you subtract corporate profits, taxes, government contributions, and transfer
payment receipts. A simplified formula would be PI = NI – Taxes on Social Security –
Corporate Tax – Undistributed profits + Social Security Benefits + Unemployment Benefits +
Welfare Benefit. (Thakur, 2022). When calculating for personal disposable income you subtract
for taxes, disposable income DI = PI – personal income taxes. Personal savings is a percentage
of personal disposable income and represents how much people save after they pay taxes. To
calculate the personal saving rate, BEA starts with personal income, and subtracts from those
personal taxes to derive “disposable personal income.” (BEA, n.d).
The current data shows the health of the U.S economy is staying strong and American
business are continuing to see profits domestically and abroad. National income and personal
income increased since Q3 which means Americans are earning more and continue to stay
resilient. This could be a reflection of the ease of Covid restrictions and a good sign the country
is recovering well.
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References
BEA. (n.d.). Measuring how much people save: An inside look at the personal saving rate.
Measuring How Much People Save: An Inside Look at the Personal Saving Rate | U.S.
Bureau of Economic Analysis (BEA). Retrieved April 4, 2022, from
https://www.bea.gov/news/blog/2017-08-21/measuring-how-much-people-save-inside-
look-personal-saving-rate
CFI. (2021, January 31). Gross national product. Corporate Finance Institute. Retrieved April 4,
2022, from https://corporatefinanceinstitute.com/resources/knowledge/economics/gross-
national-product-gnp/
Greenlaw, T. (2017). The Aggregate Demand Aggregate Supply Model. In Principles of
macroeconomics 2E. essay, 12TH MEDIA SERVICES.
Rohrer, K. (2022, March 30). Gross domestic product. Gross Domestic Product | U.S. Bureau of
Economic Analysis (BEA). Retrieved April 3, 2022, from
https://www.bea.gov/data/gdp/gross-domestic-product
The Conference Board. (2022, March 10). The Conference Board Economic Forecast for the US
Economy. Validation request. Retrieved April 4, 2022, from https://www.conference-
board.org/research/us-forecast
Thakur, A. M., Thakur, M., & Vaidya, D. (2022, February 22). Personal income.
WallStreetMojo. Retrieved April 4, 2022, from https://www.wallstreetmojo.com/personal-
income/
