Economics 101 For The Political Junkie: Part 4a

NNI. GDP steps all the goods and services produced within the borders of the country plus new home structure. It’s the value of the end products bought by households and businesses. It generally does not include a “work-in-progress” (WIP) which is completed items waiting to be assembled into a final product or items still on the assembly line. GDP is one of the gross steps used to determine how well a nation’s overall economy is working. One rule of thumb used by many is that two consecutive quarters of negative development in GDP might constitute a tough economy.

While the details of GDP are quite complex, the fundamental idea is not. For example, if you possess consumer spending, business investment, and imports/exports constant, but reduce government spending, what goes on to GDP? It theoretically down goes, does it not. Conversely, an increase Federal government spending and GDP should go up. The same, of course, would be true if you vary each of the other variables individually similarly. I led with government spending since it has characteristic the others don’t, deficit and taxes spending, to become more specific.

Notice that neither is straight included here when we discuss increasing or reducing G. But, of course, there is certainly some indirect connection that MAY play in what happens to the other factors. Specifically, if taxes are raised to be able to increase Federal government spending, that MIGHT control some consumer spending or business investment or, it might not.


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