10.3 The Components of GDP

10.3 a. Consumption

Goods and services that include durable items, nondurable items that have shorter life span and services. ^[6]

Example: Durable goods like automobiles, nondurable goods like groceries and services likes medical treatment. ^[6]

^{Components of GDP [9]}

10.3 b. Investment

Businesses and corporations undertake investment activity that involves purchases of goods which assist in productions. These investments include business investments, residential construction and change in inventories. ^[6]

Example: If demand for goods are greater than businesses had forecast, inventories will be rapidly depleted. As firms restock their inventories and adjust for a higher level of sales, they increase their production. Increases in output requires firms to employ more workers. ^[6]

^{Components of GDP [9]}

10.3 c. Government Purchases

The government sector tracks what the government actually spends money on. ^[6]

Example: Government purchases of goods and services include stealth bombers, government-funded research, space shuttles, salaries, and toasters. ^[6]

^{Components of GDP [9]}

10.3 d. Net Exports

Net exports equals the amount by which foreign spending on a home country’s goods and services exceeds the home country’s spending on foreign goods and services. ^[7]

Example: If foreigners buy $200 billion worth of U.S. exports and Americans buy $150 billion worth of foreign imports in a given year, net exports is a positive $50 billion. ^[7]

^{Components of GDP [9]}