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Compose a 500 words essay on (help me make the topic). Needs to be plagiarism free!Researchers have had varying opinions on this subject. The purpose of this research is to determine the impact of gov
Compose a 500 words essay on (help me make the topic). Needs to be plagiarism free!
Researchers have had varying opinions on this subject. The purpose of this research is to determine the impact of government expenditure of economic growth of USA in order to eliminate the confusion revolving around this phenomenon.
USA has the largest national economy. Its nominal GDP was estimated to be $15.
8 trillion in the third quarter of 2012. This represents a quarter of the global nominal GDP. The 2007 credit crunch in the world began in the US economy leading to serious economic problems such as increased levels of unemployment and high levels of public debt. This led to increased government intervention in the economy to fasten recovery from the recession. Government intervention came in the form of increased expenditure in stimulus programs and change of macroeconomic policies. The total expenditure in 2012 was $3.796 trillion and has been on the increase throughout the past decade (Federal Reserve Bank of St. Louis 24).
According to Keynesian economics, an increase in government expenditure causes an increase in GDP via the multiplier effect. According to Keynes, GDP is a function of consumption expenditure, investment expenditure, government expenditure and net exports. There is therefore a positive relationship between a government expenditure and economic growth (Stefan and Magnus 1510). However, researchers have had different views on this subject. According to by Richard Rahn, government spending lead to increased economic growth up to some optimal level above which the economy begins to contract. Proponents of the Rahn curve theory suggest that optimal government expenditure should be between 15% and 25% of GDP (Surhone, Tennoe, Henssonow 10). In a study comparing the Anglo-American Model and European Models, James, Robert and Randall (20) studies the impact of government structure and size on economic development. The paper concludes that the government is able
