Economics

Running Head : Effect of Government Expenditure and Taxes on gross domestic productNameUniversityCourseTutorDateEffects of Government phthisis and taxes on gross domestic productgross domestic product piece of ass be outlined as the consumed in the economy . GDP in US is a major indicator of economic appendage and is mensural by calculating totally goods and services produced by all people and all companies in the particular inelegant . GDP growth is a major indicator of economic growth which affects the behavior of foreign investors who prefer a rapid GDP growth because it indicates that the bucolic has favor fitted opportunities for investment and hence higher(prenominal) returns on capital (Folster and Henrekson , 2001GDP growth is an indicator whether the political science should support or stimulate economic growth . When a province is experiencing low economic growth , it may stimulate I t by dint of government expenditure . Government expenditure involves improvement in the foot to enhance transport and dialogue which is a major indicator of economic growth and hence GDP in a country . Whenever in that respect is mental retardation of the economy , GDP growth can be raise through investment in the government sector through increment in salaries and wages of government employees to put up liveness standards which is a major indicator of GDP growth (Folster and Henrekson , 2001Government bring forth revenue enhancement to promote economic growth and hence GDP from taxation . When taxation is higher than government expenditure , it implies that the country is experiencing surplus in the economy .

Higher taxation promote GDP growth in a country because there will be enough funds to finance infrastructure and enhance increment in salaries and wages of employees to be able to adjust with the prevailing living standards in the country (Folster and Henrekson , 2001When a country experience higher expenditure than tax revenue obtained in the country , which implies that the country is experiencing a deficit which can be financed through loans , grants and donations . Interests charged on external debts that atomic number 18 used to finance budget deficit have obstinate do on GDP growth . When a country has higher expenditures than tax revenue accrued from country s activities , indeed this has negative effect on GDP growth and because economic growth of the particular countriesMost developing countries depend on external debt to finance budget deficit and hence fiancy expenditures wish infrastructure to promote development . However , the higher government expenditure has been noted to retarded GDP growth and hence economic growth of the economiesReferenceFolster , S . and Henrekson , M (2001 . Growth effects of Government Expenditure and Taxation on GDP . European Economic Review . New York RoutledgePAGEEssayPAGEPAGE 4...If you want to get a full essay, order it on our website: Ordercustompaper.com

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