+1 862 207 3288 Private/household consumption expenditure (C): It includes the expenditure incurred by households on purchase of goods and services during one accounting period. ‘Disposable income’ effects consumption the most. Higher the disposable income; more is consumption and similarly, lower the disposable income lesser the consumption.
Investment expenditure (I): It refers the expenditure incurred by all the private firms on capital goods so as to satisfy the requirements of the economy. Capital stock includes: machinery, buildings etc. investment expenditure also includes the changes in inventories.
Government expenditure (G): It refers to total expenditure incurred by the government on both consumer and capital goods so as to satisfy the requirements and common needs of the economy. It depends on government policies which are focused on social welfare. Government thus; incurs both consumption expenditure (education, health etc) and investment expenditure (infrastructure like roads, highways etc).
Net exports (X-M): The difference between exports and imports of a country account for its net exports. Exports (X) include the demand by the rest of the world for domestically produced goods and services. Similarly, imports (M) refer to domestic demand for goods and services produced by the rest of the world.
