More import. APEX
More importsImports. Apex 8)imports. Apex 8)Greater levels of investment.
A actual increase in GDP.
what's the answer?
Check the inflation rate, and the real GDP. If inflation also is very high, nominal GDP could increase despite there not being any increase in output.
Why doesn't an increase in aggregate demand translate directly into an increase in real GDP
Greater levels of iinvestment
GDP would increase
More importsImports. Apex 8)imports. Apex 8)Greater levels of investment.
Greater levels of investment
A actual increase in GDP.
what's the answer?
Check the inflation rate, and the real GDP. If inflation also is very high, nominal GDP could increase despite there not being any increase in output.
Why doesn't an increase in aggregate demand translate directly into an increase in real GDP
Any increase or decrease inÊa persons income is included on the GDP. The rent on a two-bedroom apartment is an increase in income and would be included.
From such an action (increase in government spending by 5 billion and a Marginal Propensity to Consume of 90%), the GDP would increase (in the scope of simplicity) by 4.5 billion. This is because government expenditures is counted in GDP, and in this case 90% of it is consumed by the populace, so 5B * .9 = 45B. But, being that the GDP is Consumption + Gross Investment + Govt. Spending +(-) Imports/exports, one could suggest that the GDP would increase by just 5B because that which is not consumed is saved (and thus invested).
The GDP would likely not increase because 'crowding-out' implies that the public sector is reducing private sector investment. Since usually there are additional costs to government spending because of collection and distribution, I would expect crowding out must be less efficient than private investment could be and, therefore, GDP would not increase due to crowding out but would likely fall.
Governments seek to influence business to ensure that they are following regulations. If they are not, the government may fine them.