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WHAT DOES IT MEAN WHEN PEOPLE SAY "THE FEDERAL GOVERNMENT SPENT $2.731 TRILLION-ABOUT 20 PERCENT OF GDP FOR THAT YEAR" MY MAIN QUESTION IS WHAT DOES IT MEAN "20 PERCENT OF GDP"?   WHAT ARE THEY REFERRING TO WHEN THEY SAY THAT?   DO THEY MEAN THE AMOUNT SPENT WAS 20 PERCENT?

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pohnpei397 eNotes educator | Certified Educator

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What they mean by this is that for every $100 that is produced in our country, the federal government is buying up $20 worth of the production.

The reason why this matters is that it is a measure of how involved the federal government is in our economy.  The higher a percent of GDP that the federal government buys up, the more our economy is dependent on the government.  It is also a measure of how big the government is.  Many people worry about the size of government and this is one way to measure how big our government is (especially in comparison to other countries' governments).

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krishna-agrawala | Student

GDP or gross domestic product is the total value of product and services produced in a country during a given year. When we express Federal Government spending or any other kind of spending as percentage of GDP we are only trying to compare the significance of that amount as compared to the total GDP.

When we say that $2.731 trillion representing 20% of GDP was spent by Federal Government, it means that as the Federal Government spent an amount that is equivalent to about 20 percent of GDP of $13.655 trillion.