Final answer:
Consumption includes spending on durable goods, nondurable goods, and services, with the key difference being the longevity of value provided. Durable goods last for an extended period, whereas nondurable goods are quickly consumed. Disposable income is a significant factor affecting consumption levels.
Step-by-step explanation:
Durable goods are items that provide value over an extended period, like automobiles and appliances. In contrast, nondurable goods are items that are quickly consumed and their value is exhausted, such as groceries and fuel. The main difference between durable and nondurable goods is their longevity and continued service over time. For instance, a refrigerator (a durable good) can last several years, whereas food (a nondurable good) is consumed quickly. When calculating GDP, it's important to focus on the final output of goods and services to avoid double counting, which is crucial in understanding the macroeconomic perspective. Factors that affect consumption include disposable income, which is the most significant determinant as it represents the income households have available after taxes for spending or saving. Other factors include wealth, expectations about the future, credit availability, and interest rates.