Eco403 GDB No. 3 solution
Tuesday, June 21, 2011 Posted In Eco Edit This
Suppose population of Pakistan is increasing so government of Pakistan has increased its spending by Rs.1000. This in turn will cause an increase in GDP of Pakistan. Will GDP of Pakistan increase by Rs.1000 or more than Rs.1000? Justify your answer.
Note: Your answer must NOT exceed from 50 words.
Starting Date: Friday, June 17, 2011
Closing Date: Tuesday, June 21, 2011
ECO403 3rd GDB Solution
Suppose population of Pakistan is increasing so government of Pakistan has increased its spending by Rs.1000. This in turn will cause an increase in GDP of Pakistan. Will GDP of Pakistan increase by Rs.1000 or more than Rs.1000? Justify your answer.
According to economics principal increase in expenditure doesn't have impact on GDP increasing of government spending is increasing which is a burden on the shoulders of govt. So government will have to arrange that money which is quite difficult at national level. If govt. could not arrange then they will print new currency which will lead them to inflation eventually, obviously in initial stages it will be economic growth and there will be rise in GDP at current prices but no change perhaps fall in GDP at constant prices
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Another:
GDP will increase. The main point of question is that "would it be equal to Govenment spending or more"
::::::::::::::::::::::::::::::::::::::::::::::
GDP of Pakistan will increase more than Government spending.
The government spending of Rs.1000 will cause an increase in Consumption
and Investment made by hose holds.
In results, GDP of Pakistan would be higher than Government spending.
:::::::::::::::::::::::::::::::::::
For instance, government wants to spend money on Building of hospital. Government opens Tender for it.
1. After confirmation Tender, there would be investment which will be caused increase of “Investment” element of GDP.
2. There would be employment which will increase the purchasing power of consumers. People will demand for more goods and services. In response there would be more Investors to produce more goods.
These to elements would increase the GDP of Pakistan more than government spending.
Note: Your answer must NOT exceed from 50 words.
Starting Date: Friday, June 17, 2011
Closing Date: Tuesday, June 21, 2011
ECO403 3rd GDB Solution
Suppose population of Pakistan is increasing so government of Pakistan has increased its spending by Rs.1000. This in turn will cause an increase in GDP of Pakistan. Will GDP of Pakistan increase by Rs.1000 or more than Rs.1000? Justify your answer.
According to economics principal increase in expenditure doesn't have impact on GDP increasing of government spending is increasing which is a burden on the shoulders of govt. So government will have to arrange that money which is quite difficult at national level. If govt. could not arrange then they will print new currency which will lead them to inflation eventually, obviously in initial stages it will be economic growth and there will be rise in GDP at current prices but no change perhaps fall in GDP at constant prices
:::::::::::::::::::::::::::::::::
Another:
GDP will increase. The main point of question is that "would it be equal to Govenment spending or more"
::::::::::::::::::::::::::::::::::::::::::::::
GDP of Pakistan will increase more than Government spending.
The government spending of Rs.1000 will cause an increase in Consumption
and Investment made by hose holds.
In results, GDP of Pakistan would be higher than Government spending.
:::::::::::::::::::::::::::::::::::
For instance, government wants to spend money on Building of hospital. Government opens Tender for it.
1. After confirmation Tender, there would be investment which will be caused increase of “Investment” element of GDP.
2. There would be employment which will increase the purchasing power of consumers. People will demand for more goods and services. In response there would be more Investors to produce more goods.
These to elements would increase the GDP of Pakistan more than government spending.
