GDP definitions

Question 1

Investment

Answer 1

Spending by consumers on durable goods eg. house car
It also includes expenditure by firms on capital eg. factory equipment, computers
Increase in the stock of unsold goods kept by firms is also included.
(increase in the stock of unsold goods is still spending from firms on the production of goods) The value of unsold goods/inventory is part of investment spending re. national income

Question 2

Govt expenditure

Answer 2

Expenses on all g/s purchased by the govt.
(includes noth recurrent and capital expenditure) ex. rent payment for offices occupied by public libraries

Question 3

Exports

Answer 3

All expenditure on g/s that are purchased by foreign consumers

Question 4

Imports

Answer 4

Must be deducted as it represents expenditure on g/s produced in other countries and does not generate income in a local economy

Question 5

Transfer payments

Answer 5

All forms of govt payments which are not associated with any production/ provision of g/d eg. pensions, schols, unemployment benefits.
The govt does not get any g/s in return hence it in not included in calculating NI.

Question 6

Gross capital formation

Answer 6

Expenditure devoted towards increasing the existing stock of capital. It includes expenditure that adds fixed assets to the economy and expenditure for replacing depleted capital equipment