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Gross private domestic investment is the measure of investment used to compute GDP. 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 between 15 and 18 percent of GDP. Net investment is gross investment minus depreciation.
Gross private domestic investment: It includes 3 types of investment
Non residential investment: Expenditures by firms for machines, tools and so on...
Residential Investment: Includes expenditures by households and firms on apartments, buildings, new factories...
Change in inventories: The change of firm inventories in a given period. (Inventory: is the goods that is produced by firms but the goods that are kept to sold later.)
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