The Influence of GDP growth assessment on Government Expenditure: A Correlation Analysis

Question

Task: How does GDP growth assessment impact government expenditure and investment strategies?

Answer

Introduction

Government expenditure is directly influenced by GDP growth assessment. As nations registers higher GDP the, government’s expenses also increase. This is due to the government investing surplus funding in to development projects which help improve future growth and increase income generation (Barro, 1991). To understand the correlation between GDP growth assessment and its effects on government expenditure, respective data will require to be plotted on scatter plots and regression lines produced to help determine the relationship between GDP growth assessment and government spending. The following scatter plots have been generated to help deliver a visualization of the data and the attributes relationship thus delivering better understanding towards the use of relationship between GDP growth assessment and government spending.

GDP growth assessment and Government Expenditure

By observing the above chart it is clear they are directly influenced by the amount of GDP growth assessment the government registers. It is clear that Government expenditure is higher when GDP growth assessment is low (250) and once the GDP growth assessment reaches 1000. This hypothesis can be confirmed by reviewing the Government Expenditure and Gross Private Investment spatter plots below (Afonsoa & Jallesb, 2014).

Once again the correlation between the sudden decline in Gross Private Investment registered between 1943and 1947 is directly reflected on the Government Expenditure. This is observed with the sharp increase in the government expenditure when GDP investment declines thus indicating the government’s response towards investing in the public sector so as to stabilize the economy and encourage GDP growth assessment.

Short Term or a Long-Term Connection

Evaluating the graphs produced from the information clearly indicates a direct short term effect aimed at delivering long term results. When gross private investment falls the government spends heavily towards project revilement which has a direct effect on reviving the economy over the long term perspective. The short term response automatically has a long term effect thus helping ensure the overall economies constant growth.

Conclusion

Government Expenditure is therefore directly influenced by GDP growth assessment rates whereby reduce investment and low GDP growth assessment encourages the government invest heavily towered public projects with the intention of stabilizing the economy and rejuvenate public interest towards reinvestment and building the economy.

References:

Afonsoa, A., & Jallesb, J. T. (2014). Causality for the government. Applied Economics Letters, Vol. 21, No. 17,, 1198–1201.

Barro, R. J. (1991). Economic Growth in a Cross Section of Countries. The Quarterly Journal of Economics, Vol. 106, No. 2., pp. 407-443. GDP growth assessment