Define the following terms and explain their importance in the study of macroeconomics:

a. consumer expenditures
b. investment spending
c. national income
d. transfer payments

a. Consumer expenditures are the total amount spent by consumers of newly produced final goods and services (excluding purchases of new houses, which are included in the investment component of GDP). Consumer expenditures are the largest component of total spending and account for about two-thirds of GDP.
b. Investment spending is the sum of purchases by businesses on new plant, equipment, and software plus the purchase of new housing by individuals. Investment also includes inventories, newly produced goods that are not sold but are considered "purchased" by the firms that produce them.
c. National income is the total of incomes earned in the production of all final goods and services. Incomes earned include wages, rents, interest, and profits. National income does not include transfer payments because they do not come from the production of goods and services.
d. Transfer payments are payments that individuals receive as grants from the government in the form of unemployment benefits, income support for families, etc. The largest type of transfer payments in the United States are Social Security payments.