Real GDP

Real GDP is a measure of the value of economic output adjusted for price changes, which include inflation and deflation. The graph shows the real GDP from January of 1980 until March of 2018. The shades gray areas are the periods of recession. The regularly upward long-term graph is interrupted by short-term declines. These are the periods of recession. This can be seen in the period from 2008-2009 during the Great Recession. During these periods, employment and production are both greatly affected. Whenever real GDP falls, so does unemployment and vice versa. The slowdown in production causes firms to lay off or even fire some of the workers that they have. The workers that remain after these cuts will probably not receive a very good raise, and they might even be asked to take pay cuts.

Real GDP was at its lowest in the 1980’s because of a period of recession. Inflation was high around this time due to the oil crisis and the energy crisis. Stagflation, or persistent high inflation combined with high unemployment affected the economy tremendously. The savings and loan crisis was also a cause to the decrease in real GDP. Unemployment at this time was extremely high and prices went down. Real GDP was at its peak during the period of 2015 until now. Real GDP is high because unemployment is lower and production is higher.