GDP components, nominal and real GDP

Components of GDP

Y = C + I + G + NX
GDP consumption = investment + government purchases + Net Exports




Consumption (C) What is the goods and services purchased by households. It is divided into nondurable goods and durable goods. Durable goods are goods that can be used for a long time when you purchase one. For example, including a refrigerator, a car, a washing machine and the like. Nondurable goods are used by a relatively short period of time after purchase. For example, foods, drinks, clothing, and the like.

Investment (I) refers to the accumulation of real capital. Purchase of the company's new production plant and equipment are included in this investment. New homes purchased by households are included in investment. Inventory of the company are included in inventory investment as an investment.

The government purchases (G) include the goods and services purchased by the government. The only government transfer payments are not included in government purchases.

Net exports (NX) is a concept, except for income from exports. Part of which is exported in an open economy is a part of production in the country. Part of which is imported from abroad is a part of that production. Save the difference of the two may be reflected in GDP.



Nominal GDP and real GDP

Nominal GDP is a measure of the value of the year prices. (NGDP = P1 and Q1)
Real GDP is a measure of the value of the price of base year. (RGDP = P0 and Q1)

In the event of inflation than the base year will have a value greater than the nominal GDP is real GDP.

In order to evaluate the economic growth is more appropriate to consider the impact of productivity and real GDP only receive welfare.




Economic growth is g = (the year the real GDP - the base year real GDP) can be found in / base year real GDP (X 100).