With inflation hitting record highs and the economy facing a bleak outlook, economists are asking whether we should be using a rigid or elastic definition of economic growth.
A report from the University of Massachusetts at Amherst (UMass) shows that while both the elastic and rigid definitions are important, the elastic definition seems to be more helpful for forecasting the economic growth of the US.
The study’s authors argue that the elasticity of an economic system is the amount of slack that exists when the output of goods and services is increasing faster than its costs.
This slack is called elasticity.
The researchers argue that elasticity is important for the development of an economy, and that this definition allows us to accurately forecast future growth.
The researchers looked at two economic systems, the US and Australia, with different elasticities of the definition.
The authors calculated the elasticities for the US economy using the GDP per capita and the unemployment rate from the Bureau of Labor Statistics.
The unemployment rate was calculated using the US Bureau of Labour Statistics Current Population Survey and the GDP/capita data from the US Census Bureau.
They found that for the elastic GDP/Capita system, the economy grew by 3.6% per year between 2007 and 2021.
The elasticity for the rigid GDP/Elasticity definition was -3.8%.
For the US system, however, the growth was less than 1% per annum.
For this system, it was 2.1%.
The authors concluded that elasticities that are too low are likely to underestimate future growth and underestimate future unemployment.
The study also found that the rigid definition tends to underestimate the growth of unemployment.
The authors also noted that elastic measures do not reflect the full potential of the economy, but rather only the potential for the economy to grow at a faster rate.
The elasticity used by the economists is derived from a survey of economists and their answers to two questions: Do you think that GDP growth is too low or too high?
Does it matter if the growth is more than 1%, 2%, or 3% per capita?
The elasticities were 0.6, 0.9, 1.2, and 1.4%.
The elasticities are very close to the true growth rate.
The more the economy grows at a rate of 1%, the higher the elastic scale is, and the lower the elastic.
For the elastic, 1% is about the average rate of growth.
For the elastic economy, the researchers calculated that GDP/elasticity was around 1.7% per country in 2021.
For Australia, it is around 1% in 2021 and 2% in 2022.
For a more detailed discussion of the findings, read the report here.