In terms of measuring the size of the government sector in China, explain why it is important to understand how GDP's components of C, I, G, and NX are being measured in a GDP accounting sense?

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Quizplus · Accepted Answer

The Answer is We measure "uses" based upon who uses the output. For example, a washing machine used by a consumer is consumption, if it is exported it is an export, if it is sold to the government it has a G use, if it is purchased by a professional launderer it is I. So when we discuss G, it is based upon how much the government uses, not produces. In China, there is still a sizeable share of SOE (government) production of goods which are used by C, I or NX.

In Terms of Measuring the Size of the Government Sector