Components of GDP

To be used as part of a lesson and not a stand alone product.

1. Gross Domestic Product GDP , Gross Domestic Product, is the market value of all final goods and services produced within a country in a given year.

2. Consumption Investment Net Exports Government Four Components of GDP C largest component of GDP household spending Nx includes foreign trade exports - imports I spending by business firms G Federal State Local

3. Consumption Consumption includes all spending by households on goods and services. Consumption spending is broken up into four parts: durables, nondurables, and services.

4. Consumption – Durable Goods durable goods include goods such as cars, large appliances and other goods that last awhile.

5. Consumption – Nondurable Goods nondurable goods are goods that consumers buy but don’t last such as food, clothing, and other goods

6. Consumption – Services services include intangible items such as haircuts, education, medical care and legal services (shown below)

7. Investment Investment spending by business firms on goods and services that will be used to produce other goods and services.

8. Investment Investment spending includes the purchases of capital equipment, inventories, structures such as warehouses, and the buying of households by individuals.

9. Investment – Does Not Include Investment spending does not include spending on stocks or bonds.

10. Government Government spending includes purchases of goods and services made by all levels of government: federal, state, local.

11. Government Government spending can include anything from aircraft carriers to elementary schools.

12. Net Exports Net exports includes spending made in the international sector. This includes all spending on our goods and services from the rest of the world minus spending we make on goods and services from the rest of the world.

13. Net Exports Net Exports = exports – imports Nx = X - M Exports are goods we produce and sell to the rest of the world Imports are goods that are produced elsewhere which we buy

14. GDP