Problem Set #1

Components of real gross domestic product in percentage terms

Consumption

Consumption contributes the most to the overall real GDP.

Consumption grew as its portion of GDP continued to grow for 1965 until 1978. Following 1978 consumption fell as a part as a percentage of GDP most of this fall in consumption was filled in by domestic investment. This fall in consumption has much to do with the period of oil shortages in the U.S. causing the consumers to spend less. The rapid increase in consumption related to GDP is related to the domestic money supply that was in circulation feeling the effect of deflation. After this period we see a stable period of consumption growth that was helped to stabilize the economy after the unrest of the late seventies and early eighties. During 1997 we see one of the larges periods of consumption growth much to do with the increase in products in the investment and consumption components compared to government spending and net exports. After the United States deals with the dot com bubble we see stagnation in the consumption growth. This is the case until we see ourselves in the great recession in which consumption falls seemingly much to do with increases in government stimulus. The ten years following we see a recovery in consumption that then was followed by COVID-19 crisis.

Government

This graph showing the percent of GDP related to government spending has been outpaced by the other sectors greatly. This data finds that government spending has some relative inverse correlation with investment and consumption. This makes intuitive sense due to the economic understanding that as decreases in consumption and investment occur government spending is either independent from price pressures or fulfilling their mandate to stimulate employment. Most all of the spikes in percent of GDP can be explained by one of these two factors.

Investment

When looking at Investment as a percentage of GDP it seems to be the most reactive of the components to economic factors. Domestic investment has trended to always be in a phase of expansion or contraction and rarely stabilizing. Growth of investment when looking at it terms of percent of GDP often finds itself in phases of growth in which it increases 30-50% in a five to ten year time frame. Period of interest in the eighties include a rapid decrease in investment that was followed in all other components with a relative inverse movement of equal magnitude. This was quickly followed by a increase in investment as it seems tensions fell regarding trust in domestic investment. During the 1990s we see the largest period of consistent growth in investment seeming to have to do with the dot com boom that crazed the United States. This was then met with a decline as many of these firms collapsed. We see a relative recovery after this period then we are met with the largest decline during the recorded periods. This was caused by the great recession that was a culmination of collapse caused by insolvent domestic investment.

Net Exports

Net Exports has seen the largest continuous decline in regards to contribution GDP due to the continued negative implications of our trade deficit. This deficit has continued to widen as most United States firms find that the input cost of producing their products in other countries is too much of a opportunity to forgo. Much of the early fighting against the decline leading into the 2000s was seemingly created from our innovations in the space of science and technological production. The midway of 2000 we see a paradigm shift in which consumption and investment increase so quickly that paired with the outsourcing and competitors in the technology space we find our selves in a deficit we work to climb ourselves out of. Much of the rapid climb that we see in 2008 does not seem to be caused by increases in net exports but more likely due to the decrease of GDP contributed by investment and consumption. We sustained increases in net exports while investment and consumption work to recover, but we continue to lose ground in production to developing countries.

All of the Elements together

I cannot get a legend to populate in ggplot with this area plot, but didn’t feel that it was a big enough issue to bother anyone with. Aquamarine being consumption, blue being government, orange being investment, and purple being net exports.

This area plot shows off well how the four pieces trend.