Averages, if you're not careful, can as easily mislead as enlighten. It matters a lot which statistical measure of the "average-ness" that's used. A good example comes in the case of the U.S. long-term trend of economic growth. What we're interested in is to what degree the amount of GDP the average household has available … Continue reading The Mean and the Median Tell Two Different Stories
GDI
GDP and GDI: Two Sides of the Same Coin (Theoretically)
One of the starting points for understanding macroeconomics is to understand basic measures of the economy and what we call the "circular flow" of goods and services. The "circular flow" refers to the idea that firms are the economic "agents" who produce and sell all our goods and services for sale, and that households are … Continue reading GDP and GDI: Two Sides of the Same Coin (Theoretically)
GDI vs GDP
One of the most fundamental identities in macro economics is that income = spending. Since this is a macro-level national income accounting identity, that means two things: First, it must be true after-the-fact as an accounting factoid. In other words, when the BEA adds up the numbers each quarter, the money spent in the economy … Continue reading GDI vs GDP
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