March 27, 2013 at 3:56 pm #17721
Gross Domestic Product includes only final goods produced, i.e., goods in the hands of their final users. Consumer goods make up 70 percent of GDP while Investment goods make up 15 percent.
GDP does not include intermediate goods produced. For example, the production of cars are included in GDP, but the production of iron, steel, rubber, tires, and so on are not.
Obviously, consumption is a much smaller portion of overall production than it is GDP. Treating GDP as overall production in the economy exaggerates the importance of consumption to overall production in the economy.