Explain The Four Components Of Gdp

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Four Components of Gross Domestic Product (GDP) A measurement universally used for tracking a countries overall productivity called the Gross Domestic Product (GDP). The GDP encompasses four different components called consumption, investment, government purchases and net export. Consumption the first part of the GDP focuses on the purchasing of good or services by citizens. Investments the second part of the GDP centers on the purchasing of goods for companies to improve future production. Government purchases the third part of the GDP covers the government expenditures on goods or services. Net export the fourth and final component of the GDP generates between two different products from exports and imports by determining the total amount of products exported to other countries and subtracting the total imports from other countries into our country. Consumption Consumption or general household expenditures for both goods and services excluding new housing represent common examples of the first component of the GDP. Specific examples of common goods are automobiles, trucks, household appliances, food, and clothing. Services provided include both medical treatment at a local emergency room visit for a sick child, an oil change on…show more content…
These four components added together illustrate the overall productivity of an entire country and generally follow the business cycles fluctuations. Focusing only on countries GDP fails to represent how all the citizens lives improve or degrade over time just the economic productivity. Overall economist’s state improvements in the economy represented by improvements in GDP represent greater productivity but not always improvements to quality of live just the output of the greater
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