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Now we begin a three chapter (7, 8,
and 22W) discussion of economic
growth (EG).
Defining EG can be a little
complicated and we will study that in the next chapter, but
EG usually means "an increase in real domestic output
(RDO)". In chapter 7 we learn how real domestic output (RDO)
is measured.
We have been using the AS/AD model
for several lessons now but we do not know what numbers
actually go on the axes of the graph. What numbers do we use
to measure RDO on the horizontal axis of the AS/AD graph.?
Well, we use real GDP to measure RDO and here we
learn how it is calculated. In lesson 9b we learned how a
price index (CPI or GDP Index) measures the price level. We
use price index numbers on the vertical axis of the AS/AD
graph.
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