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17 Aug. 2015 | Comments (0)
- The number of actual dollars being exchanged for production
- The real value of production, which adjusts the dollars paid for production for price changes and quality improvements
- Labor input or number of hours worked, which is used to calculate real value of production per worker or hours of work
- faster growth in living standards;
- better fiscal health, reflected in a lower debt-to-GDP ratio; and
- faster growth in corporate profits as a result of faster growth in revenues relative to expenses.
- Living standards: The true standard of living of the population is underestimated due to mismeasurement of the benefits to consumers of new technologies.
- Real wages: There is a common belief that the real wages of much of the US population have stagnated or declined in recent decades. If true inflation (adjusted for quality improvements and new products) is indeed significantly lower than official inflation, then this wage stagnation argument is exaggerated, and consumer purchasing power is higher than commonly believed.
- Various payments in the economy are directly or indirectly adjusted according to the official inflation measure. If official inflation is overestimated, using this measure masks true increases in the cost of living.
- Corporate profits: Mismeasurement does not impact corporate profits because it does not impact the dollar amount of revenues or expenses.
- Future Debt burden: Mismeasurement does not impact future debt because it does not has no impact the dollar value of GDP, debt, tax revenues, or government expenditures.