Factors That Increase the U.S. GDP
Gross Domestic Product, or GDP, is the primary indicator for economic growth in the United States economy. For the sitting U.S. government, this number is particularly important because it reflects the overall economic status of the country; a higher GDP generally equates to a higher satisfaction with government and an overall positive outlook on the future of the country. There are steps the government takes that can influence GDP growth.
Other People Are Reading
-
Consumption
-
Consumption is the primary component of U.S. GDP. This number reflects all the consumer and business purchases made during the year. These purchases are integral to the growth of the economy; as people spend more money, demand for money rises. In turn, this prompts the government to increase the supply of money, with minimal inflation side effects: achieving real economic growth. The U.S. government can lower interest rates or increase minimum wages to encourage consumption. Lower interest rates allow people to make bigger purchases at a lesser cost. Increasing the minimum wage and other benefits -- such as health care -- raises consumer confidence. Consumer confidence is an estimated indicator that the economy is doing well and that the people are confident about the future.
Investment
-
Investment is primarily comprised of the growth of current businesses and the start of new ones in the U.S. Internal and inbound direct investments are included in a GDP calculation as both would produce money for the economy -- should the investment prove successful. The U.S. government encourages local spending through small-business tax breaks. A stable political and societal landscape encourages foreign direct investment; foreign investors are inherently adverse to countries with histories of political strife.
-
Government Purchases
-
Government purchasing is the GDP factor over which the government has the most direct control. The congressional annual budget outlines all of the government spending in the year for such things as technology, agriculture and education. Efficient targeting of that spending can increase economic activity beyond the originally targeted sector; for example, funding local technological advancements may allow companies to spread their research to increase overall productivity -- and subsequent economic activity -- on a national scale. Economics Help also notes that investing toward public infrastructure such as bridges and communication networks reduces costs to businesses, allowing them to expand production.
Net Exports
-
Net export is the difference between the dollar value of imports and exports. Generally, net exports should be a positive number -- a trade surplus -- rather than a negative number -- a trade deficit. Having a surplus indicates that the nation is either specialized in producing a globally desired product or is less dependent on exports: instead focusing more toward promoting local products. The government can control net exports to a certain degree through industry protection programs; these are typically limited and temporary protections against aggressive foreign suppliers to allow time for a local industry to grow and become competitive. For example, the government can protect local steel manufacturers through imposing quotas and anti-dumping policies against steel imports.
-
