What is Consumption (C) in GDP? Definition & Examples

📚 Quick Study Guide

• 🏠 Definition: Consumption (C) represents household spending on goods and services. It's a major component of GDP.
• 🍎 Included: Spending on things like food, clothes, entertainment, and medical care.
• 🚗 Durable Goods: These are goods expected to last 3+ years (e.g., cars, appliances).
• 👚 Non-Durable Goods: These are goods expected to be used up quickly (e.g., food, clothing).
• ✈️ Services: Intangible items like haircuts, doctor visits, and airline travel.
• ❌ Excluded: Purchases of new housing (falls under Investment), and intermediate goods used in production.
• ➕ GDP Formula: $GDP = C + I + G + NX$, where:
  • C = Consumption
  • I = Investment
  • G = Government Spending
  • NX = Net Exports

🧪 Practice Quiz

1. What does 'Consumption' in GDP primarily represent?
   1. Investment by businesses
   2. Government spending on infrastructure
   3. Household spending on goods and services
   4. Net exports to foreign countries
2. Which of the following is an example of a 'durable good' within Consumption?
   1. A loaf of bread
   2. A new car
   3. A haircut
   4. Electricity bill
3. Which of the following is typically NOT included in the 'Consumption' component of GDP?
   1. Spending on groceries
   2. Purchase of a new house
   3. Payment for a doctor's visit
   4. Buying new clothes
4. What type of good is gasoline considered within the Consumption category?
   1. Durable good
   2. Non-durable good
   3. Investment good
   4. Intermediate good
5. In the GDP formula $GDP = C + I + G + NX$, what does 'C' stand for?
   1. Capital
   2. Currency
   3. Consumption
   4. Construction
6. Which of these is an example of a 'service' included in Consumption?
   1. A washing machine
   2. A smartphone
   3. A lawyer's fee
   4. A bag of rice
7. Why is the purchase of a new house NOT included in the 'Consumption' component of GDP?
   1. Because it's considered a non-durable good.
   2. Because it's classified under Investment.
   3. Because it's government spending.
   4. Because it's an intermediate good.