GDP vs. Consumer Debt

GDP stands for gross domestic product, which is the value all goods and services produced in a certain period, such as a year, in the United States or another country. Consumer debt is the amount of debt that consumers have outstanding, excluding mortgage loans.

Significance

The GDP can be used to determine whether the economy is growing or shrinking. An increase in GDP means goods and services are being produced in response to demand, and the economy is growing.

Function

You can measure GDP by the expenditure method. Simply add up all the money spent on goods and services within a specific period.

Types

The four types of expenditures are consumption, investment, government purchases and net exports. According to QuickMBA.com, consumption is the largest component. The investment category represents investments in fixed assets and inventory. Take government purchases and subtract transfer payments to get accurate government purchases. Exports minus imports are how net exports are calculated.

Considerations

Consumer debt was $2.5 trillion in the United States as of 2009, based on calculations by the Federal Reserve, according to Money-zine.com.

Size

Approximately 36 percent of consumer debt is revolving credit, says Money-zine.com. Credit card debt is the largest portion of revolving debt.

Warning

The average consumer spends roughly 13 percent of his disposable income to pay down mortgage and consumer debt, according to Money-zine.com.

References

• QuickMBA.com: gross domestic product
• Money-zine.com: consumer debt statistics