What Is the Largest Component of GDP?
The largest component of GDP is consumer consumption. GDP is the acronym for gross domestic product, which is a measure of economic output.
The GDP for a nation is calculated by adding all of the country’s expenditures, or the amount of money spent. The GDP refers to the value of goods and services that the country produces. This type of calculation of the GDP is called an expenditure approach. Other methods of calculating a country’s GDP include a product approach and an income approach.
There are four types of expenditures: consumption, investment, government purchases and net exports. Of these four, consumption is the largest. Consumption includes goods, both durable and non-durable, and services. This does not include imported goods. Durable goods are items that typically have a long lifespan, such as automobiles and home appliances. Non-durable goods are usually intended for immediate use and have a lifespan of less than 3 years. Cleaning products, food, beverages and clothing are all examples of non-durable goods.
In the United States, consumer consumption represents approximately 70 percent of the nation’s GDP. Of the two sub-categories of consumption, services are the largest. Services comprise about half of the country’s GDP. In 2013, the amount of services produced was $7.125 trillion, which represented 44.7 percent of the GDP for that year. The amount of goods that year was $3.706 trillion, which could be further broken down into durable goods at $1.358 trillion and non-durable goods at $2.366 trillion.