In the identity GDP=C+I+G+(X-M) does "I" include expenditures by the government and households?

For example, if a construction firm builds new residential properties and a household buys this property. Is the value of the new residential property allocated as 'firm' expenditure or 'household' expenditure and where in the identity above would these expenditures fall?

Also if a government builds a school or bridge would this go under "I" or "G"?

  • $\begingroup$ It is just a convention, but $I$ usually covers all gross domestic capital formation by consumers, companies and government; the alternative is to exclude it and have $I$ as gross private domestic capital formation $\endgroup$
    – Henry
    May 4 '20 at 19:41
  • $\begingroup$ What does 'it' mean in "alternative is to exclude it"? $\endgroup$ May 4 '20 at 20:23
  • $\begingroup$ The alternative is to exclude Government gross capital formation from $I$ and instead include it in $G$. $\endgroup$
    – Henry
    May 5 '20 at 0:31

“I” would be called private domestic investment. (https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey)

Firm and household expenditures for investment both count as private investment.


Any investment expenditure by a government would be categorized under government spending.

If a government builds a school or bridge it would go under government spending “G”. (https://courses.lumenlearning.com/wm-macroeconomics/chapter/calculating-gdp/)

  • $\begingroup$ Thanks. But is your response conditional on whether 'I' being private domestic investment or gross domestic capital formation? See the comment by @Henry above. $\endgroup$ May 4 '20 at 20:25
  • 1
    $\begingroup$ This is in response that "I" is private domestic investment. If "I" where gross domestic capital formation then that would include government investment. Please see this post: economics.stackexchange.com/questions/14625/… $\endgroup$
    – Mike J
    May 5 '20 at 0:37

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