Question

What happens when GDP increase or decrease

Answer 1

If GDP is increase : GDP is basically calculated by the production, income and expenditure, increase in production means more employment and employment is directly proportional to rise in standard of living the better the standard of living the less is the chance of diseases and spread of epidemics , which implies healthy environment.The better is the environment less are the chances of floods and droughts which directly reduces the expenditure on rehabilitation of structures after natural disasters.


When GDP is decrease : Well GDP is the net worth of produce in a country in a financial year. So if we say, GDP fell by 2% that means the country’s produce for that year fell by 2%. Now produce can fall by two reasons

1. Due to some reason, manufacturing and services were affected (natural causes (in India read it as monsoon :P), energy insecurity etc)

2. Due to lack of demand by consumers

Now, the issue at hand is not what happens when GDP falls by 2% (only possible effect will be a fall in FDI and other investments) but rather what is happening when GDP falls by 2%. GDP is an annual report at the end of the year. So when we say we have a fall in GDP it means we had a bad year rather than we will have a bad year in the future.

So what happens on the ground when GDP falls
1) Unemployment: Less the production means less people being employed. Less employment means less amount of cash in market to buy goods. Which in effect reduces the the production rate further (yes, it is a vicious cycle )
2) Market won’t be in much optimism.
3)Rural economy: The major reason for 2% drop in GDP due to demonetization is because this segment gets affected. 49% of Indian population is in agriculture and another good percentage in agro based industries. So when rural India comes to a halt, it does take a major hit on Indian economy.

But, all these are in present situation. This all can be mitigated by a stimulus package and relaxation in Income tax limits that I think will be rolled out in 2017 budget because
1) that can put the economy back on track
2) elections in states are coming up

Answer 2

Answer:

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Explanation:

[[[[♢♢Increase in GDP will raise the demand for money because people will need more money to make the transactions necessary to purchase the new GDP.... In contract a decrease in real GDP will cause a decrease in average interest rates in an economy ]]]]