1. Use any source available to define the three types of spending identified in the article.

The article identifies nondurable goods, durable goods, and services as the three types of spending that contribute to aggregate demand in the economy. Nondurable goods are goods that normally last three years or less. Examples include food, uniforms, and similar items that are quickly used up. Durable goods are goods that normally last three years or longer. Examples include automobiles, heavy machinery, and equipment. Services are non-tangible items. Examples include lawyers, accountants, and consultants.

2. Why is the core capital goods measure of durable goods spending preferred by many economists?

The core capital goods measure of durable goods spending is preferred by many economists because it takes out some volatile and unpredictable elements of spending from the measure. The measure excludes military and aircraft spending from the total. In general the core capital goods measure includes those kinds of purchases that business make to help them produce more goods in the future. When this type of spending is up it is an indicator that economic activity will pick up.

Multiple Choice/True False Questions