how the real economic growth rate is used
a country s real economic growth rate is helpful to policymakers when making fiscal policy or monetary policy decisions these decisions might be applied to spur economic growth or control inflation real economic growth rate figures serve two purposes economic growth rates are also useful for businesses and investors an organization or company looking to expand into new markets may leverage gdp data to better understand growth opportunities in certain countries alternatively an investor seeking to diversify into emerging markets may be suited to use gdp to understand geographical areas that may receive the greatest growth governments use economic growth metrics to shape public policy and budgets while policymakers use real gdp when determining interest rates tax rates and trade policies special considerationsthe gdp growth rate changes during the four phases of the business cycle peak contraction trough and expansion in an expanding economy the gdp growth rate will be positive because businesses are growing and creating jobs for greater productivity a period of contraction will follow when businesses hold off on investing and hiring which will result in consumers having less money to spend if the growth rate turns negative the country will be in recession gdp is calculated as the sum of public consumption domestic investment government spending and net imports it is possible for a country to experience negative growth in one area but still experience net real economic growth some specific transactions are excluded from both nominal and real gdp real economic growth only reports the sale of final products goods in production i e a vehicle that is partially assembled are not counted real economic growth also excludes the sale of used goods the sale of goods produced outside of the united states financial transactions i e stocks and bonds and volunteer services 