Economics Real Vs Nominal Gdp Questions
Government spending affects GDP by directly contributing to the overall level of economic activity. When the government spends money on goods and services, it creates demand in the economy, which leads to increased production and employment. This increased production and employment, in turn, leads to higher GDP. Government spending can also have an indirect effect on GDP through its impact on other sectors of the economy. For example, government spending on infrastructure projects can stimulate private investment and economic growth. Additionally, government spending on social welfare programs can increase household income and consumption, further boosting GDP.