A relationship between nominal GDP growth rate and government spending growth rate

Contents.

1. A relationship.
2. Our derivation.
3. dV/V=0 and M=aG.

1. A relationship

Our motivation on this article is the following relation.

This figure shows a relation of growth rates between nominal GDP and government spending. Data is of 31 countries, and is 20-years averaged. This figure shows very impressive relation. Growth rates of nominal GDP (y-axis) is proportional to those of government spending (x-axis). Ranges of x- and y-axes are from 0% to 10%.

An integration of GDP definitions and an extension of the quantitative equation

In a previous article, 'A three-piece set for understanding the money circulation', we explain a quantitative view of the money circulation via our 3-piece set, the circular flow diagram, a definition of nominal GDP, and the quantity equation (Fisher's equation of exchange).

In this article, we introduce an integration of definitions of GDP and an extension of the quantitative equation. These are logical consequences from the quantitative view of the money circulation. The contents of this article are as follows.

1. An integration of GDP definitions.
2. An extension of the quantity equation.