Relationship between GdP and Inflation?

1 ANSWERS

1. Guest5772
   

   GDP = (Total dollar value of goods and services changing hands) MINUS (Inflation)
   
   Yes, GDP can grow, even when there is inflation. But for that to happen (theoretically) more goods and services must actually be exchanged, rather than having the prices for the same amount of goods and services increase.
   
   One of the reasons that the USA is able to claim that GDP is growing is that the Fed and the US Government are "fudging" the inflation statistics through the use of "hedonic adjustments", "substitution", and other methodologies. These methodologies make the inflation rate look lower than it really is. Therefore, because a smaller percentage gets subtracted out of the "total value of goods and services exchanged", it looks as if GDP is growing (or growing faster than it actually is).

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