Gross private domestic investment is the measure of investment used to compute GDP in economic measurement of nations. This is an important component of GDP because it provides an indicator of the future productive capacity of the economy. It includes replacement purchases plus net additions to capital assets plus investments in inventories. It usually amounts to approximately 12.6% of GDP. Net investment is gross investment minus depreciation. Of the four categories of calculating GDP, it is by far the least stable.
Gross private domestic investment includes 3 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: The change of firm inventories in a given period. (Inventory: is the goods that are produced by firms but kept to be sold later ("stock" in British English.)
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