Economic health is best understood by learning the importance of gross domestic product also known as GDP, fiscal policies’ effect on the economy, and the roles of government bodies that determine national fiscal policies. All of which are necessary to understanding the true works of the economy. In this paper the author will explain these topics and how changes in government spending and taxes positively or negatively affect the economy’s production and employment. Gross Domestic Product (GDP)
GDP is the statistic used to measure the economy. In other words, the U.S. economy, as measured by GDP, is everything produced by all the people and all the companies in the U.S. GDP looks at the total income that each individual in the economy is earning as well as how much is spent on the output of goods and services in our economy. GDP measures four separate components of the economy’s spending which are consumption, investment, government purchases, and net exports. GDP is a main part in the economy’s business cycle.
Business cycle is measured by the production of the goods and services or the number of the people employed. GDP measures the variables of the total income of all goods and services produced and purchased in the economy, GDP is directly related to the business cycle calculations. If the amount spent by the government or on investments is increased, the degree of inflation is altered thus changing the GDP as well as the business cycle.
Fiscal policy is the choices our government regarding the levels of government purchases and taxes. Fiscal policies have a direct influence on aggregate demand so when the government makes changes to our fiscal policies, government spending or our taxes, our economy will be directly affected. The makers of the fiscal policy should take under very close deliberation the effect of such changes. Prices of goods and production will change. Conclusion
It is important to...