The U.S. Economy Shrank for the First Time in 3 Years

That's Right! - The news clip mentions the four expenditure components used under the expenditure approach to calculating GDP: personal consumption expenditure (C), gross private domestic investment (I), government expenditure on goods and services (G), and net exports (X – M).

Well Done! - A recession is defined as a period during which real GDP decreases—its growth rate is negative— for at least two quarters.

The news clip reports that real GDP decreased for the first time in three years, in the first quarter of 2025. With only one quarter of negative real GDP growth, the U.S. economy is not in a recession.

Good Job! - The expenditure approach to calculating real GDP (Y), sums consumption expenditure (C), investment (I), government expenditure on goods and services (G) and net exports (X – M).

Y = C + I + G + X – M

The increase in imports (M) and the decrease in government spending on goods and services (G) decreased real GDP.