[NTBKtrader]

Consumption and GDP

When we buy goods and services, we are engaged in an act that will lead to their consumption. We may use (consume) them immediately (as with goods such as gasoline or services such as haircuts, etc.), sometime in the future (as we typically do with canned food, clothing, etc.), or over a long period of time (refrigerators, automobiles, etc.). We use Gross Domestic Product (GDP) as a way of measuring the dollar value of everything an individual nation, a geographic region, or the world is able to produce within a given time frame (a month, a quarter or a year).

As one may suspect, there is a relationship between consumption and GDP. As consumption rises, there is an attendant increase in the demand for goods and services that results in greater production (and hence GDP). Conversely, when consumption declines, so does GDP.

http://www.energybulletin.net/18729.html

[mattduke]

$this->bbcode_second_pass_quote('NTBKtrader', 'A')s consumption rises, there is an attendant increase in the demand for goods and services that results in greater production (and hence GDP). Conversely, when consumption declines, so does GDP.

[coyote]

I've read plenty of arguments both for and against Keynesian theory, but that's the first time I've heard anyone say he wasn't smart.

[Kingcoal]

What mattduke is describing is mercantilism, which is the theory of whoever dies with the most gold wins. I don't think that's a very smart theory either.

[mattduke]

$this->bbcode_second_pass_quote('Kingcoal', 'W')hat mattduke is describing is mercantilism, which is the theory of whoever dies with the most gold wins. I don't think that's a very smart theory either.

[Concerned]

$this->bbcode_second_pass_quote('mattduke', '')$this->bbcode_second_pass_quote('NTBKtrader', 'A')s consumption rises, there is an attendant increase in the demand for goods and services that results in greater production (and hence GDP). Conversely, when consumption declines, so does GDP.

[MrBill]

$this->bbcode_second_pass_quote('', 'N')on-Keynesian economists criticize this theory on two grounds. First, if demand slackens and prices fall, the resulting lower price will stimulate demand, which tends to limit the decline in demand. Secondly, and perhaps more importantly, "savings" represent loanable funds; an increase in the supply of loanable funds tends to lower interest rates and stimulate borrowing, so a decline in consumable goods with a short time horizon is offset by an increase in production in sectors with longer time horizons. For example, the demand for personal electronics might decline, but the demand for such things as real estate would be stimulated by favorable borrowing conditions.

[mattduke]

Keynes attempted to develop an after-the-fact justification for the systematic property-rights violations of bankers (the creation of multiple titles to the same property), as well as money creation and deficit spending by the state. It is no wonder the establishment loved him and spread his ideas throughout the universities. That is why most people have heard of him and haven't heard of Mises, resulting in an entire "lost generation" of economists. Keynes is dead, so his "long run" is over, but America is about to deal with the mess his ideas have created.