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The Four Components of Gross Domestic Product

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List the four components of GDP and provide an example of each, explaining how each item affects you and the way that you live today.

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Rousse (2008) identified the four components of Gross Domestic Product (GDP) as:
1. Personal consumption expenditures (C)
2. Gross private domestic investment (I)
3. Government consumption and gross investment (G)
4. Net exports to foreigners (NX) on Exports less Imports

These components can be displayed in this equation:
Y=C+I+G+NX , where Y is the GDP.

Personal consumption expenditures is composed of a.) durable goods, nondurable goods, and services.
Durable goods are goods that can be stored within a considerable period of time. Examples are car, electric dishwasher, freezer, computers.

Non-durable goods are items that have shorter life span. These are products that cannot be stored for a long time. A common example is the groceries we consume at home. Other non-durable goods are newspapers and magazines.

Services are non-tangible consumptions like the amenities offered in a hotel, the ride from home to work, massage, among others.

The gross private investment is generally broken down into ...

Solution Summary

This solution identifies and describes the four components of Gross Domestic Product (GDP).

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See Also This Related BrainMass Solution

Comparing GDP and National Income

Could you explain the similarities and differences between GDP and national income?

Would you define Gross Domestic Product and Gross National Product. Then answer the following question: Why would a Honda manufactured in Ohio be included in U.S. GDP, while a General Motors vehicle manufactured in Mexico would not?

Finally, please identify and describe the four components of GDP and answer the following question, please demonstrate how you arrived at your solution. If GDP is $100 billion, consumption is $60 billion, investment is $30 billion, and net exports are -$5 billion, what is government spending in this economy?

Thank you very much!

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