Explain the Growth Rate of GDP and the Term Spread?
Gross Domestic Product (GDP) is the final value in the market for all the finished goods and services manufactures in an economy in a specific time frame. It helps in measuring the total production happening domestically, helping a country to know its economic health. A rise in GDP is shows an increase in a country’s production level. There are various changes occurring in the business cycles of an economy such as stages of peak, contraction, trough, and expansion. Hence when an economy is expanding its GDP growth rate is positive.
The Gross Domestic Product (GDP) growth rate helps in calculating how quickly an economy is growing and expanding its operations. It is measured by comparing a country's GDP from its current quarter GDP to its previous quarter GDP. As GDP helps in measuring the overall economic output of a country.
The GDP growth rate is affected by some of the factors given below:
- GDP growth is defined by individual consumption in the retail sector of an economy
- Increase in business investments like construction
- Government spending is another factor determining growth in the fields of Social Security benefits, expenses in the field of defense and Medical care benefits.
- Investments made in in physical capital such as plants, machinery, building roads, transports and communication which help in reducing costs and improve efficiency. Also investments in human capital, increasing labor productivity making production more efficient by giving the required education and training to the employees.
- Net trade in an economy also determines its growth rate
- Improvements in the field of technology shows a high influence on economic growth
- The amount and availability of natural resources in a country affects its rate of economic growth
- The demand side of an economy also helps in the economic growth when there are lower interest rates, increased wage rates, financial stability etc.
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