Components of AD

Consumer Confidence/GDP
Business Confidence/GDP
Government Spending/GDP
Consumer Spending/GDP

Balance of Trade/GDP



In what ways do changes in these indicators help to explain changes in GDP?

The biggest indicators that helped determine the direction of GDP where government spending 
and consumer spending. These two indicators were generally in decent phase with GDP implying
that when consumers and the government are putting their money into circulation and into the
nation's economy, the GDP rises, which is to be expected. Inversely whenever GDP was high, 
consumer and business confidence was low; and because consumer spending and government spending
are in phase with GDP, this means that when consumer spending is high, consumer confidence is low, and vice versa. 
This makes sense due to people's tendency to believe that when GDP is at a high point, it's bound to come crashing down,
hence the low confidence in business and consumers. Additionally balance of trade was relatively inverse to GDP as well.
At first I found this odd because it would seem that when a country was in a trade surplus GDP would rise, and when in a deficit GDP would fall, however through doing research this isn't necessarily always true. In fact there are circumstances in which a country's GDP can benefit while being in a net deficit; for instance the U.S. being in a trade deficit with Germany, even though Germany still buys many US treasury bonds, real estate or some other dollar asset to make up for it. 
 


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