Monday, July 29, 2013

Real Output versus Real GDP

Real output is cars and houses and cups of coffee, and apples, and oranges. The stuff we produce is output, and it is real.

But it is stuff. Things. Goods and services. It's not money, and you can't add it all up and get a total number. It's stuff.

Real output is stuff. Real GDP is an attempt to put a monetary value on the stuff. An attempt, I say, because they try to imagine what the monetary value would have been if there was no inflation. What the value of the stuff would have been, if prices never went up.

"... if prices never went up." And for that, they use the word real.

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