There are four types of expenditures: consumption, investment, government purchases and net exports. Each of these expenditure types represent the market value of goods and services. The expenditure approach to calculating gross domestic product for the nation, or GDP, uses these four expenditure categories as a measure of economic growth and activity. As these four expenditures go up, the economy expands and businesses of all sizes do better; as they go down, the economy contracts and businesses do worse.

Consumption

Generally the largest portion of GDP, accounting for as much as two-thirds of the total, consumption is primarily made up of services, and is calculated by adding durable and non-durable goods to expenditures for services. Consumption activity is driven by changes in interest rates. As your customers begin to save money due to higher interest rates improving return on their money, they also begin to consume less because of higher interest rates on credit, which decreases the amount they purchase from your store or service. Conversely, when rates fall, your customers tend to have more discretionary money or credit, and the amount they spend on your business increases.

Investments

Investments are considered purchases in assets that are expected to provide a value over time. Small businesses and individuals can invest in a wide range of assets, from commodities to foreign currencies. The formula for total investment, nationally, is fixed investment, plus inventory investment, plus residential investment. Fixed investment for small businesses includes purchases of capital goods, such as equipment, facilities, or even robotic systems to improve manufacturing. Inventory investment includes the change in business inventories over a given period.

Government

Government spending is often used as a lever by the U.S. Federal Reserve to manipulate money supply in the the economy for various reasons. When government spending goes up, some small businesses will have more money because of government contracts or subcontracts, or because their customers have more money to spend on goods and services. When government spending goes down, some small businesses will have less money because of losing contracts, or because customers in the community have less money to spend.

Net Exports

Many small businesses export goods to other nations. Likewise, many small businesses import goods from other countries for resell. Exports are goods and services that are sent out of the U.S. for other countries to purchase. Exports are added to GDP. Imports includes goods and services that businesses in the U.S., both large and small, buy from other countries. Imports are subtracted from GDP.