Introduction to Finance

TA B L E 7 . 1
Gross Domestic Product and Its Major Components ($ Billions)
2006
2009
2012
2015
Total gross domestic product
$13,253.9
$14,258.7
$15,681.5
$18,164.8
Personal consumption expenditures
9,270.8
10,092.6
11,120.9
12,444.7 
Durable 
goods
1,071.3
1,034.4
1,219.1
1,346.9
Nondurable 
goods
2,716.0
2,223.3
2,564.2
2,664.6
Services
5,483.6
6,835.0
7,337.6
8,433.1
Gross private domestic investment
2,218.4
1,622.9
2,058.6
3,030.6
Fixed 
investment
2,165.0
1,747.9
2,000.9
2,943.7
Nonresidential
1,397.9
1,386.6
1,618.0
2,309.5
Structures
411.6
480.7
460.5
489.5
Equipment 
and 
software 
986.2
906.0
1,157.6
1,819.9 
Residential 
structures
767.1
361.3
382.8
634.2
Change in private inventories
53.4
–125.0
57.7
86.9
Net exports of goods and services
–761.8
–390.1
–560.8
–514.3
Exports
1,466.2
1,560.0
2,182.6
2,216.6
Imports
2,228.0
1,950.1
2,743.3
2,730.9
Government consumption 
expenditures and gross investment
2,526.4
2,933.3
3,062.9
3,203.9
Federal
926.4
1,144.9
1,214.3
1,235.2
State and local
1,600.0
1,788.4
1,848.6
1,968.7
Note: Some numbers may not sum exactly to total numbers shown because of rounding. 
Source: U.S. Department of Commerce, Bureau of Economic Analysis, http://www.bea.gov.

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7.1 Gross Domestic Product and Capital Formation
169
of goods and services plus funds from income-generating fi nancial assets during a specifi ed 
period, such as a year. Also recall that the 
capital account
is a summary of the fl ow of funds 
between one country and all other countries involving the transfer of fi nancial assets across 
country borders during a specifi ed time period. Included are transfers of patent values and 
fi nancial assets by individuals who move to another country. However, as currently defi ned, 
the capital account balance has a minor impact on the balance of payments. 
The 
fi nancial account
 
is a summary of the fl ow of funds between one country and all 
other countries involving foreign investments in fi xed assets and fi nancial assets during a spe-
cifi ed time period. To off set current account defi cits, direct investments (business fi xed assets 
and acquisitions) and portfolio investments (corporate stocks and bonds and government debt 
securities) by foreign businesses and governments need to be greater than the direct and port-
folio investments of their U.S. counterparts. 
When a defi cit in the current account is not fully off set by increases in the capital account 
and net increases in the fi nancial account, the Fed must either reduce its reserve assets or bor-
row from foreign central banks. 
Reserves 
are in the form of gold, foreign exchanges (curren-
cies), special drawing rights (SDRs), and reserves credit in the International Monetary Fund 
(IMF). Foreign exchanges (currencies) accounts represent the vast majority of all international 
reserve assets with the U.S. dollar forming the largest component of these currency assets. 
Saving and Investment