TRENDLINES: Fighting Inflation Looking More Closely at Current-Dollar Growth
3.7	percent annual rate in the three months from April through June, it was highlighting the change in real, or inflation-adjusted, economic activity. After all, it is real growth, not inflation, that produces more jobs and a higher standard of living.</br></br>In fact, many of the news stories about the report, including the one in The Washington Post, did not mention that the current-dollar figure for the gross domestic productÛÓas opposed to the inflation-adjusted figureÛÓreached an annual rate of $6,684 trillion. The gross</br></br>But even if it gets little public attention, changes in current-dollar GDP, which are shown in the top line of the chart at the right, are a key economic indicator for Federal Reserve policy makers. For example, it is one of only four variables included every six months when the Fed officials provide their collective economic forecasts to Congress. The others are changes in real GDP, shown in the other line in the chart, consumer price inflation and the national unemployment rate.</br></br>Changes in current-dollar GDP are always the combination of some change in real growth, which as the chart shows turns</br></br>CURRENT-DOLLAR GROSS DOMESTIC PRODUCT gets far less attention ' than changes in inflation-adjusted GDP. which shows real economic growth. Put current-dollar GDP is important too. partly because interest rale changes directly affect it rather Ilian either real growth or inflation. Thus, to keep inflation low. the Federal Reserve seeks to ÛÏ keep changes in current-dollar GDP low. and lately it has succeeded. ..I negative in recessions, and the rise in prices. In this case, the price measure is a broad one known as the implicit deflator. It covers not just consumer prices but also changes in the cost of building new homes, buying new machinery for businesses and hiring government workers, among other things.