Question

Part 1 Household consumption, which accounts for about _______% of the economy, grew at a 4.2% annualized rate during the second quarter of 2016.

Part 2 Which component of GDP would cause the largest increase in GDP if it increased by 5%

Answer 1

1) Household consumption, which accounts for about 68%* of the economy, grew at a 4.2% annualized rate during the second quarter of 2016.

*Data obtained from federal government sources.

2) Since household/consumer spending (consumption) represents almost 70% of the nation's GDP, any change will cause a major change in the total GDP. E.g. if consumption increases by 5%, then the whole economy will grow by 5% x 68% = 3.4%.