GDP - GDP expenditure method GDP = private consumption...

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expenditure method: GDP = private consumption + gross investment + government spending + ( exports imports ) , or Consumption method: GDP = compensation of employees + gross operating surplus + gross mixed income + taxes less subsidies on production and imports GDP = COE + GOS + GMI + T P & M - S Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt . Generally consumption is defined by opposition to production . But the precise definition can vary because different schools of economists define production quite differently. According to some economists, only the final purchase of goods and services constitutes consumption, and every other commercial activity is some form of production. Other economists define consumption much more broadly, as the aggregate of all economic activity that does not entail the design, production and marketing of goods and services (e.g. "the selection, adoption, use, disposal and recycling of goods and services"). Likewise, consumption can be measured by a variety of different metrics such as energy in energy economics . The total consumer spending in an economy is generally calculated using the consumption function , a metric devised by John Maynard Keynes , which simply takes the aggregate disposable income and multiplies it by a " marginal propensity to consume ". This metric essentially defines consumption as the part of disposable income that does not go into savings . But disposable income in turn can be defined in a number of ways - e.g. to include borrowed funds or expenditures from savings. Investment is the dedication of resources or assets to creating financial benefits in the form of income or profit in the future. [1] It is related to saving or deferring consumption . [ citation needed ] Investment is involved in many areas of the economy, such as business management and finance no matter for households, firms, or governments. An investment involves the choice by an individual or an organization such as a pension fund, after some analysis or thought, to place or lend money in a vehicle, instrument or asset, such as property , commodity , stock , bond , financial derivatives (e.g. futures or options ), or the foreign asset denominated in foreign currency, that has certain level of risk and provides the possibility of generating returns over a period of time. [2] Investment comes with the risk of the loss of the principal sum . The investment that has not been thoroughly analyzed can be highly risky with respect to the investment owner because the possibility of losing money is not within the owner's control. The difference between speculation and investment can be subtle. It depends on the investment owner's mind whether the purpose is for lending the resource to someone else for economic purpose or not. [3]
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This note was uploaded on 01/31/2010 for the course ACCOUNTING 30516 taught by Professor Whoever during the Spring '09 term at American Academy of Art.

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GDP - GDP expenditure method GDP = private consumption...

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