Purchasing System

And finance Allah Shmoop What Our government purchases of goods

and services Okay people The U S Economy is big

big I tell you Big eighteen trillion dollars big and

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

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

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

course but the biggest single customer Well you can probably

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

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

a second The first couple of basic So you know

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

in GDP an acronym that stands for gross domestic product

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

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

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

the stuff produced in a country All the products made

and all the services rendered its the grand accounting of

what every American does at work every day and like

an example of a service is rendered would be like

an accountant sending you a bill for four hours of

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

all that stuff we make Well on the other end

of the GDP number is all a bunch of people

paying money for all those Big Macs and Disney Plus

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

the original question Who is the biggest single customer for

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

the federal government Uh all right Now collectively the biggest

customer is well all of us each one of us

buying Starbucks frappes on the way home from work and

ordering Captain America T shirts at three a M And

Gas and Millie subscribing to forty five different magazines that

she actually has physically delivered to her house on dead

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

part of the U S GDP and collectively consumer spending

makes up About two thirds of the economy specifically represents

about twelve point eight trillion dollars of the eighteen point

six trillion dollars total of GDP in two thousand eighteen

here But none of us individually make a big dent

on our own It takes a village to buy all

that stuff The other third of the economy is split

pretty evenly between government and business spending In fact government

has the slight edge there representing three point three trillion

dollars worth of GDP purchases By comparison businesses ill spent

just under three point one trillion ish last year So

governments in general fueled about a sixth of total purchases

in the economy that counts all levels of government federal

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

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

to gross domestic product Think of GDP is a simple

equation It consists of consumer spending plus business spending plus

government spending plus net exports right net exports representing the

amount of U S goods and services bought by people

overseas Minus the foreign stuff you know we buy from

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

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

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

really fit into the equation For instance this kind of

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

debt service payments equate to about six percent of the

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

transfer payments well This category includes things like Social Security

payments where the government just sent someone to check You

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

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

in situations where the government directly buys a good or

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

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

then the amount would get counted twice right once when

the government sent the money and a second time when

the person went out and you know about food with

it Well to avoid that double counting transfer payments are

left out of the figure Okay quick review People care

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

a major contributor to GDP which measures overall economic production

It includes all the government purchases of all levels However

the stats also include a breakdown of federal spending versus

spending it state and local levels Not everything in government

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

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

things like Social Security and other similar welfare payments While

consumer spending makes up the biggest chunk of GDP with

the two third share the federal government makes up the

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