From the course: Economic Indicators

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GDP: Investment

GDP: Investment

From the course: Economic Indicators

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GDP: Investment

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- You probably make investments, in your retirement account, in the equity of your home, or in your education, and you only make investments when you think they'll pay off. Businesses also make investments, every time they buy a piece of equipment like a forklift or build a new warehouse. Now, your personal investing in financial markets isn't a part of GDP, but those business investments are. That includes commercial offices, equipment, and intellectual property products like software and R&D. While business investment is only between 15 and 20% of GDP, it's a big swing factor for overall economic growth since it can drop like a stone or surge with changes in business confidence and expectations and it's one of the four critical parts of GDP. It's officially called Gross Private Domestic Investment and it's compromised of three parts, investments businesses make, residential investments, and inventories. One caveat is that when we exclude inventories and talk about the investments…

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