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GDP
GDP
GDP stands for Gross Domestic Product, which is a key economic indicator used to
measure the economic performance of a country or region. It represents the total
monetary value of all goods and services produced within a country's borders
over a specific period, typically a year or a quarter. GDP is used to assess the
overall economic health, growth, and size of an economy.
Components of GDP:
There are four component of gross domestic product
Consumption (C)
Investment (I)
Government Spending (G)
Net Exports (X - M)
Consumption (C):
This component represents the spending by households and individuals on goods
and services. It includes everything from food, housing, and healthcare to leisure
activities and personal services. Consumption is a significant driver of economic
activity. Consumption spending is broken up into four parts: durables,
nondurables, and services.
Consumption – Durable Goods are goods that last for three years or more,
such as cars, furniture, and appliances such as cars, large appliances and
other goods that last awhile.
Consumption – Nondurable Goods are goods that last for less than three
years that consumers buy but don’t las, such as food, clothing, and
gasoline, clothing, and other goods.
Consumption – Services include intangible items such as haircuts,
education, medical care and legal services.
Investment (I):
Investment in the context of GDP refers to spending on physical assets that are
used to produce future goods and services. This includes business investment in
machinery, equipment, and structures, as well as residential construction and
changes in inventories structures such as warehouses, and the buying of
households by individuals. Investment spending does not include spending on
stocks or bonds. Investment is a crucial factor in economic growth.