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No, it wasn't clear to me.

But I don't see the relation with

there isn't a sensible mathematical definition of "real GDP" or the "price level"

from that observation.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Fri Feb 27th, 2009 at 10:45:39 AM EST
[ Parent ]
You can't get "real GDP" from just enumerating the goods and services traded and their prices at any one time. Thus, "real GDP" is not comparable across time or across countries.

Moreover, you can't get "real GDP change" from just enumerating the goods and services traded and their prices at the initial and final times, if these are far away enough to have encompass at least one business cycle.

So you have to fall back on "real GDP change" as a feature of a history of economic development.

By there isn't a sensible mathematical definition of "real GDP" or the "price level" I mean you can't meaningfully compare the "real GDP" or the "price level" between two points.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Carrie (migeru at eurotrib dot com) on Fri Feb 27th, 2009 at 10:56:52 AM EST
[ Parent ]
Therefore you usually keep one variable fixed. E.g. the real GDP in prices of 2000. Or the inflation on this basket of products. This are both reasonable quantities.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Sat Feb 28th, 2009 at 09:35:44 PM EST
[ Parent ]

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