What is included in Gross Domestic Product?

In the expenditure approach to calculating gross domestic product there are four factors: consumption, investment, and net exports.
Consumption is the expenses of households on goods and services such as food, entertainment, and other individual needs. These products can include consumer durables (long term goods like cars and furniture), non-durables (food and movies), and services (medical attention, legal services, or a real estate agent).
Investment is the expenses by firms on goods and services which mainly include capital. This includes business fixed capital, residential investment, and inventory investment. Business fixed capital is the purchase of new capital like new machinery, and new buildings. Residential investment is the construction of new homes or residential buildings. Inventory investment is the accumulation of unsold goods.
Government expenses are all purchases made by any level of government for goods and services, like teacher salaries, or equipment in a federal building. This does not include transfer payments like social security or tax benefits.
Net exports consist of exports minus imports. Exports are goods produced domestically and sold to another country. Imports are goods produced internationally and bought domestically.

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