Consumption: 

Consumption is the value of goods and services bought by people. Individual buying acts are aggregated over time and space. Consumption is normally the largest GDP component. Many persons judge the economic performance of their country mainly in terms of consumption level and dynamics. Consumption may be divided according to the durability of the purchased objects. In this vein, a broad classification separates durable goods (as cars and television sets) from non-durable goods (as food) and from services (as restaurant expenditure). These three categories often show different paths of growth.

A GDP component as it is, consumption has an immediate impact on it. An increase of consumption increases GDP by the same amount, other things equal. Moreover, since current income (GDP) is an important determinant of consumption, the increase of income will be followed by a further rise in consumption. An autonomous increase of consumption, if at the same level of income, would reduce savings, but the positive loop just described (known as the "Keynesian multiplier") will imply an increase of income level with a positive impact on future savings. If directed to goods and services produced abroad, an increase of consumption will immediately push up imports, while a similar indirect effect will result from consuming domestic products requiring foreign raw materials, energy, semi-manufactured goods. Since usually the States separately tax consumption (say with a VAT tax), an increase of consumption will also boost this type of State revenue, as well as import duties revenue in the case of imported goods. The growth mechanism of consumption-income will also provide State revenue through income taxes. To the extent firms decide to invest forecasting future demand and comparing it with present production capacity, an increase of consumption may induce new investment. In particular soaring consumption increases the production capacity utilization, with positive effects on profits; it improves expectations on future demand; it improves the financial conditions for funding investment both through profits and loans.