The 'Consumption' component of GDP, often represented by the letter 'C', encapsulates all the goods and services purchased by households within an economy. It is the largest portion of GDP, illustrating the spending behavior of residents on items such as food, clothing, healthcare, and various forms of entertainment. When consumers spend more, it reflects increased economic activity, which positively influences GDP.
An essential aspect to remember about consumption in GDP is that it only includes end-user expenditure. For instance, when individuals buy groceries for their home, it adds to the consumption value in GDP, but when a restaurant buys ingredients for their dishes, this is considered an intermediate good and does not directly contribute to the 'Consumption' measure in GDP.
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