ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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GOP doesn’t change b/c taxpayers are paying the bill
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GDP doesn’t change b/c the government isn’t building new roads
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GDP increases
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GDP decreases
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Detailed explanation-1: -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-2: -If the government spending causes the unemployed to gain jobs then they will have more income to spend leading to a further increase in aggregate demand. In these situations of spare capacity in the economy, the government spending may cause a bigger final increase in GDP than the initial injection.
Detailed explanation-3: -The GDP of a country tends to increase when the total value of goods and services that domestic producers sell to foreign countries exceeds the total value of foreign goods and services that domestic consumers buy. When this situation occurs, a country is said to have a trade surplus.
Detailed explanation-4: -In broad terms, an increase in real GDP is interpreted as a sign that the economy is doing well. When real GDP is growing strongly, employment is likely to be increasing as companies hire more workers for their factories and people have more money in their pockets.