Sunday, August 16, 2009

True or False: “Consumption is 70 percent of GDP”?

Via:  Business Week via CR

An article in Business Week declares that “consumption is not 70 percent of GDP.”


Yes, 70 percent of GDP in recent years has been “consumption” as the government defines it.  And yes, if the saving rate out of disposable income goes up four to eight percent, the consumption part of “consumption” (or some part of “consumption,” anyway, could be discretionary health care spending) will go down. 

So the point has no material bearing on the collapse of consumption spending.

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