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Econ: What are Government Purchases of Goods and Services? 1 Views


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What are Government Purchases of Goods and Services? Government purchases of goods and services encompasses federal, state, and local government purchases. The goods and services purchased by government can range from defense spending, infrastructure, and land management and restoration to telecoms, office equipment, transportation, and janitorial services, and everything in between that government consumes or utilizes to facilitate operation of its various functions. It is also one of the 4 components of GDP.

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Transcript

00:00

And finance Allah Shmoop What Our government purchases of goods

00:06

and services Okay people The U S Economy is big

00:11

big I tell you Big eighteen trillion dollars big and

00:15

told a lot of Big Macs Dizzy Plus she's from

00:17

Amazon and Netflix subscription Yeah it's all counted in there

00:20

Well who's buying all that stuff All of us of

00:22

course but the biggest single customer Well you can probably

00:26

guess where we're going with this one from the title

00:28

of the video but we'll get back to that in

00:30

a second The first couple of basic So you know

00:32

what we're talking about The U S economy is measured

00:34

in GDP an acronym that stands for gross domestic product

00:39

You have you ever seen a baby being born That's

00:41

pretty gross domestic product but well that's not what we're

00:44

talking about here The GDP We're talking about measures all

00:47

the stuff produced in a country All the products made

00:50

and all the services rendered its the grand accounting of

00:53

what every American does at work every day and like

00:57

an example of a service is rendered would be like

00:59

an accountant sending you a bill for four hours of

01:01

doing your taxes like that's a service But who's buying

01:05

all that stuff we make Well on the other end

01:07

of the GDP number is all a bunch of people

01:09

paying money for all those Big Macs and Disney Plus

01:12

she's and subscriptions to Netflix All right now back to

01:14

the original question Who is the biggest single customer for

01:17

all this stuff No not your hoarder Aunt Millie It's

01:21

the federal government Uh all right Now collectively the biggest

01:25

customer is well all of us each one of us

01:27

buying Starbucks frappes on the way home from work and

01:30

ordering Captain America T shirts at three a M And

01:33

Gas and Millie subscribing to forty five different magazines that

01:36

she actually has physically delivered to her house on dead

01:39

trees That's called consumer spending It makes up the biggest

01:42

part of the U S GDP and collectively consumer spending

01:46

makes up About two thirds of the economy specifically represents

01:50

about twelve point eight trillion dollars of the eighteen point

01:53

six trillion dollars total of GDP in two thousand eighteen

01:56

here But none of us individually make a big dent

01:59

on our own It takes a village to buy all

02:01

that stuff The other third of the economy is split

02:04

pretty evenly between government and business spending In fact government

02:08

has the slight edge there representing three point three trillion

02:11

dollars worth of GDP purchases By comparison businesses ill spent

02:15

just under three point one trillion ish last year So

02:18

governments in general fueled about a sixth of total purchases

02:22

in the economy that counts all levels of government federal

02:25

state and local So that's government spending on goods and

02:28

services It's an economic stat that tracks the government contribution

02:32

to gross domestic product Think of GDP is a simple

02:35

equation It consists of consumer spending plus business spending plus

02:39

government spending plus net exports right net exports representing the

02:44

amount of U S goods and services bought by people

02:46

overseas Minus the foreign stuff you know we buy from

02:49

them That's what net Well there are some things keep

02:52

in mind about government spending we're talking about here There

02:54

are a few big chunks of government budgets that don't

02:57

really fit into the equation For instance this kind of

02:59

government spending doesn't count interest payments on the debt Those

03:03

debt service payments equate to about six percent of the

03:06

federal budget huge number It also doesn't count what's called

03:09

transfer payments well This category includes things like Social Security

03:13

payments where the government just sent someone to check You

03:15

know money is simply transferred from the government's bank account

03:18

then to someone else's Well the figure is only looking

03:20

in situations where the government directly buys a good or

03:23

a service meaning the government's contribution to G P Right

03:27

now Well it's a figure included Social Security payments Well

03:31

then the amount would get counted twice right once when

03:34

the government sent the money and a second time when

03:36

the person went out and you know about food with

03:38

it Well to avoid that double counting transfer payments are

03:41

left out of the figure Okay quick review People care

03:44

about government purchases of goods and services because well it's

03:46

a major contributor to GDP which measures overall economic production

03:51

It includes all the government purchases of all levels However

03:54

the stats also include a breakdown of federal spending versus

03:57

spending it state and local levels Not everything in government

04:00

budget you are included The stats don't include debt service

04:04

They also don't include what's called transfer payments you know

04:07

things like Social Security and other similar welfare payments While

04:11

consumer spending makes up the biggest chunk of GDP with

04:14

the two third share the federal government makes up the

04:17

biggest single purchaser Yeah even if Aunt Millie gives it 00:04:20.922 --> [endTime] a run for the money

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