(Source: FRED II, Eurostat) ANS: Looking at the data in the first column, indeed the 18 EZ economies are growing. But once you do some calculations adjusting for prices, different currencies, and both, a different picture arises. First, we can see that PPP GDP in euros has stayed more or less constant at about trillion. €7.6 This is because, although the EZ economies have been growing, it has been slow, about 1.5 percent. Secondly, we see that, relative to the dollar, the euro buys fewer goods and services. Similarly, for real GDP, inflation was relatively high from 2010–2013, and then calmed down, eroding income. With respect to nominal GDP in U.S. dollars, we see that in 2015 it fell and is roughly trillion less than it was in 2010; this is largely due to the sharp decline in the value of €1 the euro relative to the U.S. dollar in 2015. All these combine to reduce PPP adjusted GDP over the period. Table 2.7: U.S. and Eurozone (18 Economies) Nominal GDP in 2014 GDP GDP $US/Euro Eurozone PPP NGDP RGDP PPP Exchange NGDP $US ($US) CPI PEZ/PUS Rate (billions) Year (€s) (€s) 10,004 12,658 10,222 7,536 0.933 0.79 1.33 9,535 2010 10,636 13,634 10,222 7,641 0.958 0.78 1.39 9,794 2011 9,809 12,651 10,013 7,625 0.982 0.78 1.29 9,835 2012 10,029 13,201 9,982 7,549 0.995 0.76 1.33 9,936 2013 10,210 13,439 10,116 7,683 1.000 0.76 1.33 10,113 2014 8,858 11,547 10,403 7,981 1.000 0.77 1.11 10,403 2015 DIF: Difficult REF: 2.4 TOP: IV. MSC: Analyzing
(Source: FRED II, Eurostat) ANS: Looking at the data in the first column, indeed the 18 EZ economies are growing. But once you do some calculations adjusting for prices, different currencies, and both, a different picture arises. First, we can see that PPP GDP in euros has stayed more or less constant at about €7.6 trillion. This is because, although the EZ economies have been growing, it has been slow, about 1.5 percent. Secondly, we see that, relative to the dollar, the euro buys fewer goods and services. Similarly, for real GDP, inflation was relatively high from 2010–2013, and then calmed down, eroding income. With respect to nominal GDP in U.S. dollars, we see that in 2015 it fell and is roughly €1 trillion less than it was in 2010; this is largely due to the sharp decline in the value of the euro relative to the U.S. dollar in 2015. All these combine to reduce PPP adjusted GDP over the period. Table 2.7: U.S. and Eurozone (18 Economies) Nominal GDP in 2014 Year Eurozone NGDP (billions) $US/Euro Exchange Rate PEZ/PUS CPI GDP PPP (€s) RGDP (€s) NGDP ($US) GDP PPP $US 2010 9,535 1.33 0.79 0.933 7,536 10,222 12,658 10,004 2011 9,794 1.39 0.78 0.958 7,641 10,222 13,634 10,636 2012 9,835 1.29 0.78 0.982 7,625 10,013 12,651 9,809 2013 9,936 1.33 0.76 0.995 7,549 9,982 13,201 10,029 2014 10,113 1.33 0.76 1.000 7,683 10,116 13,439 10,210 2015 10,403 1.11 0.77 1.000 7,981 10,403 11,547 8,858 DIF: Difficult REF: 2.4 TOP: IV. MSC: Analyzing