Real GDP and Components of Aggregate Demand: 1929 to 1940

Thanks to rdan and Moon of Alabama for realizing that the BEA provides certain macroeconomic data that would help follow-up on my criticisms of the latest garbage from Amy Schlaes. But let’s graph real GDP rather than nominal GDP – please. Your qualitative statements still hold and if we also graph the components of aggregate demand (CON = consumption, INV = investment, GOV = government purchases, EX = exports, and IM = imports), we can really show what an uninformed rightwing dolt Ms. Schlaes happens to be.

Yes – real GDP did quite well after FDR took office as did investment demand. Now Ms. Schlaes does complain that the government got too big but wouldn’t most macroeconomists argue that the rise in government purchases lead to a rise in aggregate demand, which augmented the rise in domestic private spending (consumption and investment) as we recovered from the Great Depression? I also find fascinating the behavior of exports and imports. While it is true that exports fell from 1929 to 1932, imports fell even more. So with net exports rising – Ms. Schlaes seems to be at a loss to explain how these trade balance effects lead to the Great Depression.