Yesterday's GDP numbers were weak. In the second quarter, the economy grew at a 2.4% annual rate. While normally a good rate of growth, this is bad for coming out of a recession - when growth has to be much higher in order to re-employ all of the people who lost their jobs. The key point is that we still need to close the output gap between actual and potential GDP. While growth is good, it is better for the growth to be appropriate to the economy's (society's) needs.
The bigger point, and one that needs to be pointed out to students, is that the economy has lost a lot of ground in this last recession and the output gap is huge. The Free Exchange blog on the Economist web page has a post and graphs that compare the change in output from this recession to all of the other post-war recessions - this is the worst. Again, this is a good graph for making students think. Here is the graph:
No comments:
Post a Comment