Saturday, 7 January 2012

How economic activity relates to GDP

Economic activity relates to GDP as economic activity of the population of a country or region  is related to the level of spending and production. Faster growth in the economy will cause GDP levels to rise as consumer confidence will rise making people more optimistic and therefore more likely to spend their money on goods,  however with fast growth there is a risk of high inflation to occur.
Slow or negative growth (a recession) will cause consumer confidence to decline making people pessimistic, resulting in consumer spending to fall, as people will become unwilling to spend there money because growing unemployment is associated with a recession climate, therefore jobs will become less secure, threatening consumers source of income therefore causing more saving to occur in order for people to have money to live on if their job is lost.

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