ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The decrease in spending reduces aggregate demand for goods and services, slowing economic growth temporarily. Alternatively, when the government reduces spending, it reduces aggregate demand in the economy, which again temporarily slows economic growth.

Detailed explanation-2: -When government increases its spending, it stimulates aggregate demand, and causes some real GDP growth. That growth creates jobs, and more workers earn income.

Detailed explanation-3: -Economic Considerations Business investment can affect the economy’s short-term and long-term growth. In the short term, an increase in business investment directly increases the current level of gross domestic product (GDP), because physical capital is itself produced and sold.

Detailed explanation-4: -Broadly speaking, there are two main sources of economic growth: growth in the size of the workforce and growth in the productivity (output per hour worked) of that workforce. Either can increase the overall size of the economy but only strong productivity growth can increase per capita GDP and income.