GDP: Policy
Investigate the options for policymakers to improve real GDP.
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Video Q&A
0-15 min
Levels of GDP vs. Percentage Change in GDP
OVERVIEW
This video assignment provides students with an explanation for why economists prefer to discuss changes in GDP through percentages and discusses why percent change is a necessary metric to gain a full picture of changes occurring.
GDP is often expressed in dollars, or “levels” but it is often more useful to discuss changes in GDP in percentages. For example, let’s say GDP is $20 Trillion, meaning that the total market value, expressed in dollars, of all final goods and services produced in an economy in a given year is $20 Trillion. Now, let’s say the economy increased in size by $10 billion – that seems like a large increase, right? Well, it is large in dollar terms, but in percentage terms it is 0.05 percent, or 5 one-hundredths of one percent, that’s very small.
As such, economists generally find it helpful to talk about changes in GDP in terms of percentages.
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