Krugman has a post entitled “More coulda been worse blogging” which features this single chart:
But we know, or should, that RGDP is the end game, the driver being aggregate spending, or NGDP, which throws out real output on the one hand and prices on the other. The more real output we get for a price level so much the better.
Why did the US generate more real output than the Eurozone? Logically, the US “drove aggregate spending” harder. And, “magically”, prices in the US rose less than in the Eurozone. But then, take stock of what went on in Australia. In terms of the end game – RGDP – it did best. It also had the highest rise in prices (all headline consumer price indices). But wouldn´t that (rather small difference, after taking into account that Australia did not experience a fall in prices) be worth the gains in real income and employment?
I bet the Aussies will say aye.
The charts illustrate: