Economic literacy question

[CARLHAYDEN]

Just wondering if anyone at this forum can correctly answer this question:

What is the result when the inflation rate (as measured by the consumer price index) increases at a rate greater than the increase in the gross domestic product?

[Politico]

What is, "negative real GDP growth," Alex?

Here is the follow-up question: How prevalent is "hidden inflation" right now, both in the US and abroad?

[Gustaf]

What is, "negative real GDP growth," Alex?

Here is the follow-up question: How prevalent is "hidden inflation" right now, both in the US and abroad?

If the GDP increase mentioned here is a nominal one that would seem to be the right answer.

[opebo]

'an increase in the rate'?  So you're saying the rate is increasing at an increasing rate?  or the same rate only it is a smaller number than the GDP increase?  Or that the rate of increase in the rate of inflation is greater than the rate of increase in the growth rate of the GDP?

I think you need to be more literate to pose such questions, CarlHaydan.

[ag]

I must say that, for once, opebo has exhibited greater economic literacy then the original poster.

So, what was the point of the original post BTW? Unless this is clarified, I will just remove the thread.

[Link]

'an increase in the rate'?  So you're saying the rate is increasing at an increasing rate?  or the same rate only it is a smaller number than the GDP increase?  Or that the rate of increase in the rate of inflation is greater than the rate of increase in the growth rate of the GDP?

I think you need to be more literate to pose such questions, CarlHaydan.

This.

[Bacon King]

Just wondering if anyone at this forum can correctly answer this question:

What is the result when the inflation rate (as measured by the consumer price index) increases at a rate greater than the increase in the gross domestic product?

Attempting to clarify, here: you're asking what's going on when price level and real output are both increasing, but inflation is increasing at a noticeably greater rate?

That'd be modeled as a rightward shift in the aggregate demand curve, with its intersection with the short run aggregate supply curve approaching the economy's long-run output potential (in the intermediate range, approaching the classical range).

The result would be significant demand-pull inflation along with a rather abrupt cessation of real GDP growth as the economy reached, and attempted to pass full employment/maximum long-run output levels.

Though if you meant nominal GDP when you just said Gross Domestic Product, yeah, that'd be negative real GDP growth along with some cost-push inflation, probably, which would cause stagflation.

[Ban my account ffs!]

Just wondering if anyone at this forum can correctly answer this question:

What is the result when the inflation rate (as measured by the consumer price index) increases at a rate greater than the increase in the gross domestic product?

You mean:
What is the result when the inflation rate is larger than the growth rate of the GDP?

The result is that real GDP, which accounts for inflation and deflation, actually shrinks in terms of the buying power of a dollar in any given year/time period.

[CARLHAYDEN]

Now, for some data:

http://www.tradingeconomics.com/united-states/gdp-growth

http://www.usinflationcalculator.com/inflation/current-inflation-rates/

[opebo]

Now, for some data:
http://www.tradingeconomics.com/united-states/gdp-growth
http://www.usinflationcalculator.com/inflation/current-inflation-rates/

I enjoyed looking at those, Carl, but I would remind you that generally speaking GDP growth rate data is adjusted for inflation.

[CARLHAYDEN]

Now, for some data:
http://www.tradingeconomics.com/united-states/gdp-growth
http://www.usinflationcalculator.com/inflation/current-inflation-rates/

I enjoyed looking at those, Carl, but I would remind you that generally speaking GDP growth rate data is adjusted for inflation.

I waited to see if others would fall for the bait.

So, I'll add some more.

What was the inflation rate was assumed in the calculations to "adjust for inflation" for the second quarter of 2011?

[opebo]

What was the inflation rate was assumed in the calculations to "adjust for inflation" for the second quarter of 2011?

No doubt it was inaccurate, since accuracy in such figures is impossible, but in my opinion we are in a severe deflation, so any claims of inflation are dubious.

[Torie]

Yes, the GDP number is in real dollars.  So we have stagflation, with the emphasis on stag. The government has been printing a lot of money to keep up the money supply since banks aren't lending much, and may be beginning to overshoot the mark. That might be why the Fed members are in sharp disagreement about just how much more money to print.

What is unusual about all of this, is that it seems to me much of it is generated by a lack of confidence as opposed to the usual tools really being out of whack. What the economy really needs to do is see a real good therapist, who can convince it that this too shall pass - eventually.

[Politico]

What is unusual about all of this, is that it seems to me much of it is generated by a lack of confidence as opposed to the usual tools really being out of whack. What the economy really needs to do is see a real good therapist, who can convince it that this too shall pass - eventually.

Very good post. I would just add that, unfortunately, Obama is clearly not that therapist.

[opebo]

What is unusual about all of this, is that it seems to me much of it is generated by a lack of confidence as opposed to the usual tools really being out of whack. What the economy really needs to do is see a real good therapist, who can convince it that this too shall pass - eventually.

Torie, I'm afraid the master himself, John Maynard Keynes talked about the animal spirits.. it is in the nature of capitalism that panic, irrationality, and fear rules the day.  We need the State to take over the economic function in order to provide confidence and reduce the deleterious influence of the market.

[Politico]

What is unusual about all of this, is that it seems to me much of it is generated by a lack of confidence as opposed to the usual tools really being out of whack. What the economy really needs to do is see a real good therapist, who can convince it that this too shall pass - eventually.

Torie, I'm afraid the master himself, John Maynard Keynes talked about the animal spirits.. it is in the nature of capitalism that panic, irrationality, and fear rules the day.  We need the State to take over the economic function in order to provide confidence and reduce the deleterious influence of the market.

How has that worked out over the past three years? Oh, I get it: The Stimulus Package was just not big enough. My mistake. Let's borrow two or three trillion from the Chinese this time around. That ought to do it, right?

[opebo]

How has that worked out over the past three years? Oh, I get it: The Stimulus Package was just not big enough. My mistake. Let's borrow two or three trillion from the Chinese this time around. That ought to do it, right?

Well, Politico, it is not unlike when you have an infection - you have to take all your medicine, not just set your own dose.  The stimulus was like giving an aspirin to an elephant.

What we need is massive takeover of the economy by the State, as in World War II.   This is the only way that these deflationary depressions can be solved.

[Politico]

How has that worked out over the past three years? Oh, I get it: The Stimulus Package was just not big enough. My mistake. Let's borrow two or three trillion from the Chinese this time around. That ought to do it, right?

Well, Politico, it is not unlike when you have an infection - you have to take all your medicine, not just set your own dose.  The stimulus was like giving an aspirin to an elephant.

What we need is massive takeover of the economy by the State, as in World War II.   This is the only way that these deflationary depressions can be solved.

Deflation can be combated by dropping cash from helicopters if necessary. Just go ask Bernanke. That is not the problem (our problem: in short, a crisis of confidence). Government is not the solution to our problem.