Introduction to Finance

personal consumption 
expenditures (PCE) 
expenditures 
by individuals for durable goods, 
nondurable goods, and services
government expenditures (GE) 
expenditures for goods and services 
plus gross investments by federal, 
state, and local governments
gross private domestic investment 
(GPDI) 
measures fi xed investment 
in residential and nonresidential 
structures, producers’ durable 
equipment, and changes in business 
inventories
net exports (NE) 
exports of goods 
and services minus imports

---

168
C H A PT E R 7 Savings and Investment Process
in 2012 and $3.0 trillion in 2015. Fixed investment declined sharply between 2006 and 2009, 
largely due to a dramatic decline in residential structures and as a refl ection of the housing 
price bubble that burst in 2006, resulting in a steep decline in home prices that continued 
through 2009. The change in private inventories for 2009 was ‒$125 billion, refl ecting the 
severity of the fi nancial crisis of 2007–08 and the 2008–09 recession. 
Government expenditures, in the form of consumption and gross investment, amounted 
to $3.2 trillion in 2015. Continued increases occurred in both federal and state and local gov-
ernment expenditures over the four years shown in Table 7.1. 
Implications of International Payment Imbalances
GLOBAL
Table 7.1 shows that imports of goods and services exceeded exports by about 
$761.8 billion in 2006, $390.1 billion in 2009, $560.8 billion in 2012, and $514.3 billion 
in 2015. Dollar amounts of exports increased across the four years depicted in Table 7.1. 
In contrast, the dollar amount of imports fell between 2006 and 2009.This development 
refl ects the impact of the 2007–08 fi nancial crisis and the 2008–09 recession, as well as the 
weakening of the U.S. dollar relative to other major currencies as the decade of the 2000s 
came to a close. However, imports increased rapidly in 2012 and 2015 refl ecting recent 
economic recovery and the strengthening of the U.S. dollar. 
Recall from our discussion in Chapter 6 that the 
current account 
records a summary
 
of 
the fl ow of funds between one country and all other countries involving the sale and purchase