<p>Broadly speaking GDP is measure of output economy produces and from economic perspective output is equal to income. Assuming we are talking about real growth not just nominal one a main consequence of negative economic growth is that on average people's real incomes will be lower and their material standards of living worse.</p>
<p>Under spending approach to GDP (which is equivalent to income approach), GDP in closed economy is given as:</p>
<p><span class="math-container">$$Y = C+I+G,$$</span></p>
<p>where <span class="math-container">$Y$</span> is the output/income, <span class="math-container">$C$</span> is consumer spending, <span class="math-container">$I$</span> is investment and <span class="math-container">$G$</span> is government spending.</p>
<p>So another way of thinking about consequences of negative growth is that negative growth will make left-hand side of this equality (<span class="math-container">$Y$</span>) lower. If <span class="math-container">$Y$</span> declines then economy will have to either:</p>
<ol>
<li>consume less - which directly affects well being of consumers.</li>
<li>invest less - which affects the rate at which economy can grow.</li>
<li>government will have to spend less - which means that government will have to cut provision of some of the public goods or other spending it does.</li>
</ol>
<p>In either case it will lead to some worse material standard of living for the particular country.</p>
<p>Also the above are only the most direct effects. I did not touch upon any potential distributional questions. Economic growth empirically has a first order impact especially on the welfare of poor (see  <a href="https://mitpress.mit.edu/books/economic-growth-second-edition" rel="nofollow noreferrer">Barro &amp; Sala-i-Martin Economic Growth</a> and sources cited therein). There are also further implications, it is not much of an overstatement that almost everything in economy depends on what the economy can produce, but exploring this to more full extent would be beyond the scope of stack exchange post.</p>
<p>As a further reading I recommend any macro textbook or even just introductory economics textbook (my concrete recommendations would be either Blanchard et al. Macroeconomics a European Perspective or Mankiw Principles of Economics), any of them will explore significance of output to economy from many different sides.</p>

CC BY-SA 4.0
2020-09-23T07:15:01.040Z
2020-09-23T07:48:40.493Z
2020-09-23T07:48:40.493Z
1muflon1
<p>Many countries are facing negative GDP growth due to coronavirus.<br />
I am curious to know what will the significant consequences of having negative economic growth?</p>

CC BY-SA 4.0
2020-09-23T06:52:45.643Z
There are way too many consequences---good and bad, trivial and significant---of negative economic growth. Please narrow down your question so that it can be answered adequately within the SE format.
Herr K.
CC BY-SA 4.0
2020-09-23T11:07:10.097Z
Much depends on the length of the period over which growth is negative.  If it's just a short-term downturn within a broadly rising trend the long-term consequences may be very limited.
Adam Bailey
CC BY-SA 4.0
2020-09-23T11:50:02.213Z
I guess it will last for at least a year ...
SacrificialEquation
<gdp>
What are the consequences of having negative GDP growth?
SacrificialEquation
# What are the consequences of having negative GDP growth?

(Asked by: username_0 on 2020-09-23)

Many countries are facing negative GDP growth due to coronavirus.  
I am curious to know what will the significant consequences of having negative economic growth?

**Tags:** gdp
> **Comments:**
> **username_1**: There are way too many consequences---good and bad, trivial and significant---of negative economic growth. Please narrow down your question so that it can be answered adequately within the SE format.  
> **username_2**: Much depends on the length of the period over which growth is negative.  If it's just a short-term downturn within a broadly rising trend the long-term consequences may be very limited.  
> **username_0**: I guess it will last for at least a year ...  

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## 1 answers

### Answer by username_3 on 2020-09-23. Score: 1 | Accepted answer

Broadly speaking GDP is measure of output economy produces and from economic perspective output is equal to income. Assuming we are talking about real growth not just nominal one a main consequence of negative economic growth is that on average people's real incomes will be lower and their material standards of living worse.

Under spending approach to GDP (which is equivalent to income approach), GDP in closed economy is given as:

$$Y = C+I+G,$$

where $Y$ is the output/income, $C$ is consumer spending, $I$ is investment and $G$ is government spending.

So another way of thinking about consequences of negative growth is that negative growth will make left-hand side of this equality ($Y$) lower. If $Y$ declines then economy will have to either:

1. consume less - which directly affects well being of consumers.
2. invest less - which affects the rate at which economy can grow.
3. government will have to spend less - which means that government will have to cut provision of some of the public goods or other spending it does.

In either case it will lead to some worse material standard of living for the particular country.

Also the above are only the most direct effects. I did not touch upon any potential distributional questions. Economic growth empirically has a first order impact especially on the welfare of poor (see [Barro & Sala-i-Martin Economic Growth](https://mitpress.mit.edu/books/economic-growth-second-edition) and sources cited therein). There are also further implications, it is not much of an overstatement that almost everything in economy depends on what the economy can produce, but exploring this to more full extent would be beyond the scope of stack exchange post.

As a further reading I recommend any macro textbook or even just introductory economics textbook (my concrete recommendations would be either Blanchard et al. Macroeconomics a European Perspective or Mankiw Principles of Economics), any of them will explore significance of output to economy from many different sides.


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