Today we discussed gross domestic product (GDP). Factors that make up GDP are personal consumption, government expenditures, investment spending, and net exports. Personal consumption is money spent on durable good (goods that will last three years or more), nondurable goods (don't last as long such as food and clothing), and services. Government expenditures consists of government spending on defense, roads, and schools. Investment spending is money spent for nonresidential (plants and equipment), residential (houses for one or multiple families), and business inventories. Net exports are made up of imports and exports. GDP is found as follows:

GDP = personal consumption + government expenditures + investment spending + exports - imports

GDP can also become highly inaccurate because of inflation rates. The value of money goes down the higher the GDP can appear when it is actually lower than it was previously once adjusted for inflation. When GDP declines for two consecutive quarters the economy, by definition, is in a recession. If GDP grows to quickly fears of inflation arise and the government may raise interest rates to try to control inflation. GDP is calculated in current dollars and constant dollars. Current dollar is in today's dollar value with inflation. Constant dollar is without inflation so it can easily be compared to past GDP's when inflation was lower.