Bryan Caplan  

Question for Recalculationists

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Jeffrey Friedman on Competitio... NY Times' Non-Reporting Report...
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...


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COMMENTS (3 to date)
E. Barandiaran writes:

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 writes:

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 writes:

I respond to the question with a question: why does nominal GDP suddenly fall by 5 percent?

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