How does government spending affect real GDP?

How does government spending affect real GDP?

Government spending can have a direct impact on real GDP. When the government increases its spending, it injects money into the economy, which can stimulate economic activity and increase aggregate demand. This increased demand can lead to higher production levels, increased employment, and ultimately an increase in real GDP. Conversely, if the government reduces its spending, it can lead to a decrease in aggregate demand, potentially resulting in lower production levels, decreased employment, and a decrease in real GDP.