From the course: Economics for Business Leaders

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Breaking down GDP

Breaking down GDP

From the course: Economics for Business Leaders

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Breaking down GDP

- There's an important link between the economy and business after all, most businesses will tend to do better when the economy is strong and they'll tend to be weaker when the economy isn't. And when senior leaders talk about the economy, they're usually talking about GDP, which stands for Gross Domestic Product. Basically, GDP represents all of the new economic activity within the borders of a country during a specific period of time. And people usually talk about quarterly or annual GDP growth rates and how GDP compares to the previous year or previous quarter. And there are four parts to GDP, consumption is the part of GDP that represents goods and services consumed in an economy. It's also the most important part of GDP for business leaders, especially in advanced economies. In the United States for example, consumption represents about 70% of GDP. That means that people buying stuff represents about 70% of all…

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