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Inflation, GDP and the Stock Market

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Inflation, GDP and the Stock Market

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swalsh81 posted on Thu, Nov 29 2012 6:50 PM

This is something I have wondered for a little while. We are always quoted the numbers for GDP and the stock market as whether the economy is doing well. I understand the problem with aggregates, but what I am wondering is

If an increase in the GDP number or the increase in the stock market averages is related to either inflation or an increase in the money supply.

For instance, (and I know this is probably an oversimplification and there are more things to consider) if GDP grows at a rate smaller than inflation, can it still be considered growth?

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Smiling Dave replied on Sat, Dec 1 2012 5:33 PM

But then, do you have a problem with the GDP measure or the inflation measure or both?

I know about the flaws in the way the govt measures inflation; they are readily available. As for GDP, I have seen less about the flaws in actually computing it than about how GDP is a very flawed measure of economic growth. In other words, I don't know about flaws in actually measuring the length of someones nose, but I do know about flaws in thinking nose length is an indicator of intelligence.

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