Suppose that the modern U.S. economy faced no out-of-the-ordinary recalculation problems. By what percentage do real GDP and employment fall if nominal GDP unexpectedly declines by 5%?
P.S. If you’re wondering why I’m asking…
Suppose that the modern U.S. economy faced no out-of-the-ordinary recalculation problems. By what percentage do real GDP and employment fall if nominal GDP unexpectedly declines by 5%?
P.S. If you’re wondering why I’m asking…
Dec 7 2009
Megan McArdle and Russ Roberts discuss the issue in the last quarter of their podcast. If you prefer an academic paper, read Joshua Aizenman and Nancy Marion. They write, in part today's temptation to inflate away some of the debt burden is similar in some respects to that in 1945, when inflation successfully eroded...
Dec 7 2009
If you want to see a great example of a purported news story in which the reporters try to bias the story one way, check out today's New York Times story on Climategate. I preface this by saying that I am no expert on climate change. My point is not that those who think it's happening, that it's manmade, and that it ...
Dec 7 2009
Suppose that the modern U.S. economy faced no out-of-the-ordinary recalculation problems. By what percentage do real GDP and employment fall if nominal GDP unexpectedly declines by 5%?P.S. If you're wondering why I'm asking...
READER COMMENTS
E. Barandiaran
Dec 7 2009 at 5:40am
Bryan, if anyone had answered your question when Milton Friedman asked it for the first time (it was around 1970), Milton would have given that economist two Nobel prizes. It reminds me of another question that Larry Sjaastad used to ask in the 1970s and 1980s when many Latin American were being forced to devalue their currencies: how large nominal devaluation should be to get a particular real devaluation (indeed Larry knew that there was no answer to it but that was the purpose of asking it).
fundamentalist
Dec 7 2009 at 9:12am
The question doesn’t make sense in the recalc realm. NGDP fell 5% because of the recalc problem. If there was no recalc problem, NGDP woulnd’t have fallen much at all, and therefore real gdp would not have fallen either.
Arnold Kling
Dec 7 2009 at 11:48am
I respond to the question with a question: why does nominal GDP suddenly fall by 5 percent?
Comments are closed.