Government spending adds directly to GDP through _____ and indirectly through _____.

Question

Quizplus · Accepted Answer

Government purchases (such as spending on infrastructure projects or buying goods and services from private firms) directly contribute to GDP by creating demand for goods and services in the economy. Transfer payments (such as welfare, unemployment benefits, or Social Security) indirectly contribute to GDP by increasing the disposable income and consumption of those receiving the payments, which generates demand for goods and services. Military spending is just one form of government purchases and is not the only way in which the government can contribute to GDP growth. Higher interest rates and crowding out are not direct or indirect effects of government spending on GDP.

Government Spending Adds Directly to GDP Through _____ and Indirectly