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What is the impact on GDP if consumer spending increases? Would the answer be different if...

What is the impact on GDP if consumer spending increases? Would the answer be different if the consumer spending were directed toward foreign goods?

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Answer #1

1) The GDP is commonly used as the indicator of economic health and the standard of living of a country. The GDP is calculated on an annual basis. It includes private and public spending, government spending, investments and exports minus imports with in the territory of the country.

2) There is a direct relationship between the GDP and consumer spending. The GDP will rise as consumer spending increases. The spending of consumers is the earning of the producers with in the territory of the country. When consumer spending increases towards foreign goods, the spending of consumers becomes the earning of the foreign producer. Since GDP includes only the domestic factors, it will not enhance the GDP growth.

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