scroll to top
Stuck on your essay?
Get ideas from this essay and see how your work stacks up
Word Count: 500
GDP Consumption Investment Government Exports - Imports Consumption spending by individuals by far the largest portion of GDP 70 includes goods and services used up in a relatively short period of time These are goods and services which people buy on a regular basis such as food entertainment rent clothes and gas Investment spending accounts for the second largest portion of GDP 15 These are goods and services that will provide future benefits and allow for greater production in the long-run Examples are spending on factories equipment research and development and new houses Net Exports is calculated by subtracting imports or those goods we buy from abroad 14 from exports or those goods other countries buy from us 10 Consumption spending is influenced foremost by disposable income income after taxes As disposable income rises consumption rises as disposable income falls consumption falls Thus higher tax rates would reduce disposable income and cause consumption spending to fall A second part of consumption autonomous spending doesnt depend on current income People without incomes will borrow or withdraw from past savings wealth to pay for necessities Autonomous consumption depends on expectations of future income future economic conditions wealth and interest rates If people expect a future raise predict a healthy economy or have more wealth they will likely consume more If interest rates increase borrowing becomes more expensive and the opportunity cost of not leaving money in the bank rises Thus higher interest rates will cause most people to save more and consume less Businesses invest because they think it will increase profits and lower costs Thus investment spending is determined by expectations of future revenues costs and economic conditions If people begin spending more businesses will have incentives to increase production capabilities To do this requires investing Thus as output GDP increases investments increase At high interest rates businesses will be less likely to invest borrowing becomes
@Kibin is a lifesaver for my essay right now!!
- Sandra Slivka, student @ UC Berkeley
Wow, this is the best essay help I've ever received!
- Camvu Pham, student @ U of M
If I'd known about @Kibin in college, I would have gotten much more sleep
- Jen Soust, alumni @ UCLA