The Affect of Gdp

The effect a deficit, surplus, or debt has on the GDP is a fear for most people. Understanding the variances between the three is beneficial because it relieves many of the concerns one may have. Deficits and surpluses are due to the way the government chooses to implement their accounting measures and many times can show one or the other by including different funds from other programs (Colander, 2010). Many times running either a deficit or surplus can have little or no effect on the GDP. The government can run a deficit during certain periods, and the GDP can increase because of the expansionary period (Colander, 2010). The GDP can suffer even during a surplus period because of the policies implemented. The GDP is volatile and deficits or surplus can make a big difference or little difference on the state of the GDP (Colander, 2010). The final piece to look at is the debt the government is accruing can be positive or negative, depending on the debt to GDP ratio. Debt is the amount of interest the government pays and by looking at the GDP to debt ratio creates an understanding whether the debt will affect the GDP. When the ratio shows that the GDP is still greater than the governmental debt the GDP is unaffected and the health of the economy is still good, when the debt increases above the GDP the economy is in trouble (Colander, 2010).