Private domestic investment measures how much a country's private sector spends on physical capital. This physical capital helps industries produce future goods, but is not immediately bought or used by consumers. For example, machinery that companies build to manufacture further goods counts as private domestic investment. Private domestic investment also covers the production of finished goods that join a company's inventory rather than being sold. You can calculate private domestic investment from macroeconomic metrics related to the gross domestic product.
Subtract the nation's net exports from the gross domestic product. For example, if a nation has a trade surplus of $500 billion and a GDP of $13.82 trillion, subtract $500 billion from $13.82 trillion to get $13.32 trillion.
Subtract the government's gross spending from this sum. For example, if the government spends $2.61 trillion in combined consumption and investment, subtract $2.61 trillion from $13.32 trillion to get $10.71 trillion.
Subtract the combined value of all personal consumption, which includes what private citizens spend on goods and services. For example, if the nation's personal consumption reaches $8.43 trillion, subtract $8.43 trillion from $10.71 trillion to get $2.28 trillion. This is the nation's gross private domestic investment.
- Jupiterimages/Comstock/Getty Images
- Explain the Difference Between a Stock & a Dividend
- What Is the Difference in Hedge Funds and a Private Equity Fund?
- What Are the Potential Faults in Using the IRR as a Capital Budgeting Technique?
- What Is a Convertible Promissory Note?
- Financial Advisors Vs. Investment Bankers
- List of Investment Boutiques
- Exchange Traded Fund vs. Real Estate Investment Trust
- What Does the Sony Corp. Own?