The largest component of GDP is a) consumption.
GDP, or Gross Domestic Product, measures the total value of all goods and services produced in a country over a specific time period. It is typically calculated using the expenditure approach, which breaks down GDP into four main components: consumption, investment, government purchases, and net exports.
Among these components, consumption accounts for a significant portion of GDP in most economies, particularly in developed nations. This includes all private expenditures by households and non-profit institutions, such as spending on food, housing, healthcare, and education. Investment follows, which refers to business investments in equipment and structures. Government purchases, which include spending on goods and services by federal, state, and local governments, come next. Finally, net exports, which represent the value of a country’s exports minus its imports, typically have the smallest share.
In summary, consumption drives economic activity and is often the largest part of GDP, highlighting the importance of consumer spending in the overall economy.