Question

I am stuck on approaching the answer to this question, and most of the answer that I have found online and on Chegg are do not make any sense regarding this question. What would be a good interpretation of what this question is asking regarding the GDP?

"Think about the increases since 2001 in spending for the Department of Homeland Security and the wars in Afghanistan and Iraq. These increases represent government expenditures that have increased GDP. Explain whether you think that these increases in GDP have made the typical person better off."

Answer 1

Yes, it has.

Consider that when going to war the US armies are using different types of equipment like aircraft, guns and other things which a person on the battleground carries with them. All of these goods are manufactured in the US itself. when there is a war the demand for such goods increases and at a higher demand different companies like Lockheed etc. Increase their production.

At a higher production level, the employment level also goes up the wages goes up and with it, the average spending done on other goods by the employees of these companies also increase. For example, at a higher wage, a Lockheed employee will demand more strawberries and it will increase the supply of strawberries and the same cycle will continue. The government has to spend more to acquire these armaments and the more they spend the more demand it creates.

So, the life of a normal person has been better off because of these increased government expenditures but it will also be better if the government increase there expenditure on other things like health, education etc.

Conclusion: THe life has been better but it could have been made much better with government expenditure in targeted goods which would directly affect people life like better roads, industries etc. There are better uses of taxes which is carried out properly will have a bigger effect on people like. (not taking away the point that this war has improved the lives of people in some way or other.)