Gross private domestic investment is the measure of physical investment used in computing
GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
in the measurement of nations'
economic activity. This is an important component of GDP because it provides an indicator of the future
productive capacity Productive capacity is the maximum possible output of an economy. According to the United Nations Conference on Trade and Development (UNCTAD), no agreed-upon definition of maximum output exists. UNCTAD itself proposes: "the productive ''resources ...
of the economy. It includes replacement purchases plus net additions to
capital assets plus
investments in inventories. From 2002 to 2011 it amounted to 14.9% of GDP, and from 1945 to 2011 was 15.7% of GDP (BEA, USDC, 2013).
Net investment is gross investment minus depreciation. Of the four categories of GDP (investment,
consumption,
net exports
The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balance ...
, and
government spending
Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting, the acquisition by governments of goods and services for current use, to directly satisfy the individual ...
on goods and services) it is by far the least stable.
Gross private domestic investment includes 4 types of investment:
* Non-residential investment: Expenditures by firms on
capital such as tools, machinery, and factories.
* Residential Investment: Expenditures on residential structures and residential equipment that is owned by landlords and rented to tenants.
* Change in inventories (or stocks): The change of firm inventories in a given period. (
Inventory or stock is the goods that are produced by firms but kept to be sold later.)
References
National accounts
Gross domestic product
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