Question

How is the US economy affected by healthcare spending? Provide at least five contributing factors.

Answer 1

The first contributing factor is the increase in demand for the health care services and GDP enhances due to the increase in healthcare spending. The second contributing factor is the increase in employment opportunity as more demand will be served by the more supply of health care services and new jobs will be be created. The third factor is the increase in inflation as higher spending level, will cause more money chasing few goods and inflation will rise. Further, cost of health care will also increase. The fourth contribution will be the redistribution of income. Here, less money will be available to spend on other products and services and more money will be spent on health care. It will negatively affect the other sectors in the economy. The fifth factor will be the loss of jobs in other sectors in the economy. Since demand will be less on other sectors, then supply from these sectors will also decrease and jobs will be reduced. So, other sectors will suffer with excess attention to the health care spending.