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Detailed Explanation of GDP Components definitions

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  • Consumption
    Household spending on goods and services, divided into services, nondurable goods, and durable goods.
  • Services
    Intangible acts purchased by consumers, such as haircuts or legal advice, with no physical product exchanged.
  • Nondurable Goods
    Tangible items with less than three years of expected life, like food or shoes, purchased by households.
  • Durable Goods
    Tangible items with more than three years of expected life, such as cars or washing machines, bought by households.
  • Investment
    Spending on new capital goods, including equipment, structures, and inventory, excluding financial assets.
  • Business Fixed Investment
    Firm spending on long-term physical assets like factories, buildings, or equipment for production.
  • Residential Investment
    Expenditure on new home construction by households or firms, including major renovations.
  • Inventory Change
    Difference between beginning and ending stock of unsold goods, which can be positive or negative.
  • Government Purchases
    Spending by local, state, and federal governments on goods and services, excluding transfer payments.
  • Transfer Payments
    Government payments like welfare or unemployment checks, not counted in GDP until spent by households.
  • Net Exports
    Value of exports minus imports; can be positive or negative, indicating trade surplus or deficit.
  • Exports
    Goods produced domestically and sold to buyers in other countries, contributing positively to GDP.
  • Imports
    Goods produced abroad and purchased domestically, subtracted from GDP calculation.
  • Expenditure Approach
    Method for calculating GDP by summing consumption, investment, government purchases, and net exports.