Explain why the government consumption expenditures?

Question

Explain why the government consumption expenditures (G) component of GDP falls short of actual government expenditures

Answer 1

When you are computing GDP, you are trying to calculate the total value of goods and services produced by an economy, in a specified period of time, usually the current year. These goods do not include transfer payments, or interest on the government debt, which is what much of government spending constitutes. Transfer payments are SSI, medicare, food stamps etc. Thus, the G component is calculating, the amount of ships, airplanes, and services government employees provide, etc etc

Answer 2

Government Consumption Expenditures

Answer 3

Government outlays are a combination of transfers and expenditures The expenditures portion can be categorized as consumption and investment, just like in the private sector. I imagine that the portion spent on infrastructure and buildings is categorized as investment. I do not know what is done with the purchases of weapon systems for the military, but that could account for a big piece if it is considered investment.