Economics

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Identify the four major components of GDP. 

The four major components of GDP are mentioned below:

1. Private Consumption Expenditure:

2. Investment Expenditure:
3. Government Purchases of goods and services.
4. Net Exports:

Classify expenditures that comprise each component of the GDP measure.

1. Private Consumption Expenditure: in this component, it measures the money value

of the consumer's services and goods which has been purchased by the ordinary
households or by the non-profit institution for current utilisation of a period of
account (Crowley & Hallett, 2015).
2. Investment Expenditure: the term investment means to add a capital during a
particular period. The investment also includes the building machinery housing
construction or in addition to a firms inventories of goods.
3. Government Purchases of goods and services: in this part, it shows the expenditure
of the government on various goods and services. This includes the purchase of the
intermediate goods, wages and salaries which has been paid by the government. Such
kinds of purchase are often treated as part of the final product (Crowley & Hallett,
2015).
4. Net Exports: in this part, it shows the difference between the domestic spending on
the foreign goods which is the imports (M) and the outside spending on the domestic
goods which is the export (X). The difference between the export and the imports of
the country call the Net Exports.

Distinguish the intermediate outlays that are excluded from the GDP
statistic.

Based on the video it can understand that the products which are made inside the country no
matter who will produce that good can be calculated in the GDP. There are a few things
which do not include in the GDP which are as follows:

1. The sales of goods that were produced outside will be excluded from the GDP
statistics.
 2. Sales of the used goods will be not calculated.
3. Illegal sales of goods and service which is considered as a black market.

References:

Crowley, P. M., & Hallett, A. H. (2015). Great moderation or “Will o’the Wisp”? A time–
frequency decomposition of GDP for the US and UK. Journal of Macroeconomics, 44, 82-
97.