In a carefully written paper complete the following List the

In a carefully written paper, complete the following:

List the four components of Gross Domestic Product(GDP) and provide an example of each.

Explain how each item affects you and the way that you live today

Solution

Four components of Gross Domestic Product:-

1. Consumption Expenditure:- Expenditure on purchase of final goods for consumption is called consumption expenditure. It includes for example: consumer services, consumer non-durable goods i.e., goods which are not repeatedly used like butter, milk etc. and consumer durable goods which are repeatedly used for several years like washing machines, furniture etc.

2. Investment Expenditure:- Expenditure on the purchase of final goods for further production is called Investment expenditure. For example, expenditure by farmers on purchase of thrashers or tractors.

3. Government Spending:- refers to expenditure on final goods and services by the government. For example, expenditure on purchase of goods for consumption by the defence personnel.

4. Net Exports (X - M):- refers to difference between exports (X) and imports (M) during an accounting year.

Conclusion:- Components of GDP is sum of Consumption expenditure, Investment expenditure, Government spending and Net exports.