From the course: Economic Indicators

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GDP: Government spending

GDP: Government spending

From the course: Economic Indicators

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GDP: Government spending

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- Money that government spends comes from tax dollars and sometimes, from deficit spending, which is when the government spends money it doesn't have and borrows the money by issuing debt. Whenever the government spends money, whether it's from taxes or debt, that money gets counted as part of economic growth, as part of gross domestic product, or GDP. Government spending is one of the four parts of GDP, and these expenses are broken out into two categories. First, there are federal, or national, expenses and investments. These are for national defense and non-defense. This would be items like aircraft carriers, as well as federal government infrastructure spending, like on interstate highways. Second, there are state and local expenses and investments. This usually includes schools, local infrastructure, and other expenses. All of these contribute positively to GDP. In total, all government expenses are between 15 and 20% of GDP. Now, because politicians are focused on growth…

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