Measuring the Economy: GDP and Growth¶

Summary¶

This chapter introduces macroeconomic measurement, focusing on how economists measure the overall health of an economy. Students will learn about Gross Domestic Product (GDP), the difference between nominal and real GDP, and how economic growth affects living standards. The chapter explains the limitations of GDP as a measure of well-being.

After completing this chapter, students will be able to interpret economic data and understand what GDP figures mean for everyday life.

Concepts Covered¶

This chapter covers the following 12 concepts from the learning graph:

Gross Domestic Product
GDP Calculation
Nominal GDP
Real GDP
Per Capita GDP
Economic Growth
Standard of Living
Aggregate Demand
Aggregate Supply
Multiplier Effect
Crowding Out
Business Cycle

Prerequisites¶

This chapter builds on concepts from:

Welcome to the Big Picture¶

In the first few chapters, we zoomed in on individual markets—how supply and demand work, how prices form, and how consumers and businesses make decisions. That's microeconomics: the study of individual pieces.

Now we're zooming out to look at the entire economy at once. This is macroeconomics, and your first superpower here is understanding how economists measure whether an economy is doing well or poorly.

Think about it: when news anchors say "the economy grew 2.5% last quarter" or politicians argue about "economic recovery," what do those words actually mean? How do you measure something as massive and complex as an entire economy?

By the end of this chapter, you'll know. And here's the kicker—once you understand how economic measurement works, you'll also understand how those numbers can be manipulated, misinterpreted, or cherry-picked to support almost any political argument. That's critical thinking power.

Gross Domestic Product: The Economy's Report Card¶

Gross Domestic Product (GDP) is the total market value of all final goods and services produced within a country during a specific time period (usually a year or quarter).

Let's break that definition apart:

Total market value: We add up everything using prices (dollars) so we can combine apples and oranges (literally)
Final goods and services: Only finished products count, not the parts that go into them
Produced within a country: Location matters, not who owns the company
Specific time period: Usually measured quarterly or annually

Here's an analogy: If the economy were a student, GDP would be like their GPA. It's a single number that tries to summarize a lot of complex activity. And just like GPA doesn't tell you everything about a student (creativity, kindness, athletic ability), GDP doesn't tell you everything about an economy.

Why "Final" Goods Matter¶

Imagine a farmer sells wheat to a miller for $1. The miller grinds it into flour and sells it to a baker for $2. The baker makes bread and sells it to you for $3.

If we added up all those transactions ($1 + $2 + $3 = $6), we'd be counting the same wheat three times! That's called double counting, and it would wildly inflate our GDP number.

Instead, we only count the final good—the bread you bought for $3. That $3 captures all the value created along the way.

Stage	Product	Price	Counted in GDP?
Farm	Wheat	$1	No (intermediate)
Mill	Flour	$2	No (intermediate)
Bakery	Bread	$3	Yes (final good)

The Value-Added Approach

Another way to avoid double counting: add up the value added at each stage. The farmer adds $1, the miller adds $1 more (sells for $2 - bought for $1), the baker adds $1 more. Total: $1 + $1 + $1 = $3. Same answer!

Three Ways to Calculate GDP¶

Economists can calculate GDP using three different approaches, and they should all give the same answer (in theory):

1. The Expenditure Approach (Spending)¶

Add up everything that's purchased in the economy. This is the most common method you'll encounter.

GDP = C + I + G + (X - M)

Where:

C = Consumer spending (households buying stuff)
I = Investment spending (businesses buying equipment, construction)
G = Government spending (public services, infrastructure)
X = Exports (what foreigners buy from us)
M = Imports (what we buy from foreigners)

We subtract imports because that spending goes to other countries' GDPs, not ours.

2. The Income Approach (Earning)¶

Add up all the income earned producing goods and services: wages, rent, interest, and profits. Every dollar spent is a dollar earned by someone, so this should equal the expenditure total.

3. The Production Approach (Making)¶

Add up the value added by every industry. Agriculture contributes X, manufacturing contributes Y, services contribute Z, and so on.

Approach	What It Measures	Key Components
Expenditure	Who buys output	C + I + G + (X - M)
Income	Who earns from output	Wages + Rent + Interest + Profit
Production	Who creates output	Sum of value added by industry

Diagram: GDP Components Breakdown¶

GDP Components Pie Chart

Type: chart

Bloom Taxonomy Level: Remember (L1) Bloom Verb: identify, recognize

Learning Objective: Students will identify the relative size of each GDP component in a typical developed economy.

Purpose: Visualize how consumer spending dominates GDP composition.

Chart Type: Interactive pie chart

Data (approximate US percentages): - Consumer Spending (C): 68% - Investment (I): 18% - Government Spending (G): 17% - Net Exports (X-M): -3% (imports exceed exports)

Visual Elements: - Color-coded pie slices with percentages - Hover reveals dollar amounts (example: C = $15 trillion) - Legend showing component definitions - Note explaining why net exports can be negative

Interactive Features: - Hover over slice to see details and examples - Click slice to expand showing subcategories: - C expands to: Durable goods, Nondurable goods, Services - I expands to: Business equipment, Structures, Inventories - G expands to: Federal, State/Local

Implementation: Chart.js or p5.js pie chart with interaction

Diagram: GDP Calculator¶

GDP Calculator MicroSim

Type: microsim

Bloom Taxonomy Level: Apply (L3) Bloom Verb: calculate, use

Learning Objective: Students will calculate GDP using the expenditure approach by inputting component values and seeing the formula in action.

Purpose: Make GDP calculation concrete and interactive.

Canvas Layout: - Left side (400px): Input panel with sliders/fields - Right side (300px): Calculation display and result

Visual Elements: - Four input sliders with dollar amounts: - Consumer Spending (C): $0-20 trillion - Investment (I): $0-5 trillion - Government Spending (G): $0-5 trillion - Net Exports (X-M): -$2 to +$2 trillion - Real-time equation display: GDP = C + I + G + (X-M) - Running total that updates as sliders move - Comparison bar showing result vs actual US GDP

Interactive Controls: - Sliders for each component - "Reset to US values" button (loads current approximate values) - "Try a recession scenario" button (reduces I and C) - "Try export boom" button (increases X-M) - Toggle to switch between billions and trillions display

Default Parameters: - C = $15 trillion - I = $4 trillion - G = $4 trillion - X-M = -$0.7 trillion - Result: approximately $22.3 trillion

Behavior: - As sliders move, total updates in real-time - Formula highlights which component is being adjusted - Shows percentage contribution of each component - Displays "Your economy would be ranked #X in the world" based on result

Instructional Rationale: The Apply/calculate objective requires hands-on manipulation. Students see how changes in each component affect total GDP, making the abstract formula concrete.

Implementation: p5.js with sliders and real-time calculation

What's Included—and What's NOT¶

GDP tries to measure all economic production, but some things get left out:

Included in GDP:

Market transactions (stuff bought and sold)
New goods and services (not resold items)
Legal activities (even if we disapprove)

NOT included in GDP:

Household work: Cooking, cleaning, childcare at home (unless you hire someone)
Volunteer work: No money changes hands
Underground economy: Illegal transactions, unreported cash income
Used goods: Selling your old car doesn't count (it was counted when first sold)
Environmental quality: Pollution damage not subtracted
Leisure time: A country where everyone works 80 hours/week could have higher GDP but lower quality of life

This is a critical thinking moment: GDP measures quantity, not quality. A car crash actually increases GDP (medical bills, car repairs, legal fees). Cleaning up an oil spill increases GDP. Does that mean those things are good for the economy? Of course not.

GDP Doesn't Measure Happiness

Countries with high GDP aren't automatically happy. Some research shows that beyond a certain income level, more money doesn't correlate with more life satisfaction. GDP measures production, not well-being.

Nominal vs. Real GDP: Cutting Through the Inflation Illusion¶

Here's where your critical thinking superpower really kicks in. Nominal GDP and Real GDP are different, and confusing them is a classic way to be misled.

Nominal GDP = GDP measured in current prices (today's dollars)

Real GDP = GDP adjusted for inflation (constant dollars from a base year)

Why does this matter? Imagine the economy produces exactly the same stuff this year as last year—same number of cars, same amount of food, same services. But prices rose 5% due to inflation.

Nominal GDP would show 5% "growth"—but nothing actually changed! We're just measuring with inflated dollars.

Real GDP strips out the inflation, showing actual changes in production.

Year	Nominal GDP	Inflation	Real GDP Growth
2024	$25 trillion	3%	2%
2025	$27 trillion	4%	2.5%

A politician might brag: "GDP grew from $25 trillion to $27 trillion—that's 8% growth!" But wait—inflation was significant. Real growth was actually much lower.

Always ask: Is this nominal or real? It's one of the easiest ways politicians and media manipulate economic numbers.

Diagram: Nominal vs Real GDP Comparison¶

Inflation Adjuster MicroSim

Type: microsim

Bloom Taxonomy Level: Understand (L2) Bloom Verb: explain, interpret, compare

Learning Objective: Students will explain the difference between nominal and real GDP and interpret what economic growth figures actually mean.

Purpose: Visually demonstrate how inflation distorts economic measurement and why real GDP matters.

Canvas Layout: - Top (200px): Two side-by-side bar charts (Nominal vs Real) - Bottom (200px): Controls and explanation panel

Visual Elements: - Left chart: Nominal GDP over 5 years (rising steeply) - Right chart: Real GDP over same period (rising less steeply) - Difference area highlighted between the two - Inflation rate display for each year - "Truth meter" showing how much of nominal growth is real vs inflation

Data Visibility Requirements: - Stage 1: Show Year 1 baseline ($20 trillion, 0% inflation, same nominal and real) - Stage 2: Year 2 with 3% inflation - show nominal rises 5%, real rises only 2% - Stage 3: Continue through Year 5, gap between charts grows - Stage 4: Final comparison showing cumulative inflation effect

Interactive Controls: - Year slider (2021-2025) - Inflation rate adjuster (0-10%) - "Real growth rate" adjuster (0-5%) - "Show the math" toggle revealing calculation - Reset button

Behavior: - Moving inflation slider shows immediate impact on nominal/real gap - Hover over any year bar to see detailed breakdown - "Show the math" reveals: Real GDP = Nominal GDP / (1 + inflation rate) - Warning message appears if inflation > real growth: "Nominal growth is mostly an illusion!"

Instructional Rationale: Side-by-side visual comparison makes the abstract concept of inflation adjustment concrete. Students see that the same economy can look very different depending on measurement choice.

Implementation: p5.js with dual bar charts and interactive controls

Per Capita GDP: Fair Comparisons¶

Per capita GDP means GDP divided by population—GDP per person.

$$\text{GDP Per Capita} = \frac{\text{Total GDP}}{\text{Population}}$$

Why does this matter? China has a larger total GDP than Switzerland, but Switzerland has much higher per capita GDP. Which country has a higher standard of living for its average citizen? Probably Switzerland.

Per capita GDP lets us compare countries with different population sizes fairly.

Country	Total GDP	Population	GDP Per Capita
United States	$25 trillion	330 million	$75,000
China	$18 trillion	1.4 billion	$13,000
Switzerland	$0.8 trillion	8.7 million	$92,000
India	$3.4 trillion	1.4 billion	$2,400

Still Not Perfect

Per capita GDP is an average—it doesn't tell you about inequality. A country could have high per capita GDP but most of it concentrated among a few wealthy people. Always look deeper than single numbers.

Economic Growth: Getting Richer Over Time¶

Economic growth is the increase in real GDP over time. When we say "the economy grew 3%," we mean real GDP increased by 3% compared to the previous period.

Growth matters because it's how societies get wealthier over time. The United States is much richer today than in 1900 primarily because of sustained economic growth.

The power of compound growth is remarkable:

At 1% annual growth, GDP doubles in about 70 years
At 2% annual growth, GDP doubles in about 35 years
At 3% annual growth, GDP doubles in about 24 years
At 7% annual growth (like China recently), GDP doubles in about 10 years

Small differences in growth rates lead to huge differences over time!

What Causes Growth?¶

Economies grow when they can produce more output. This happens through:

More inputs: More workers, more capital, more natural resources
Better productivity: Getting more output from the same inputs (technology, education, efficiency)

Most long-term growth comes from productivity improvements—doing things smarter, not just doing more things.

Standard of Living: What Growth Means for You¶

Standard of living refers to the level of material comfort available to people—their income, quality of housing, healthcare access, education, and more.

Economic growth generally improves standard of living. When real GDP per capita rises, average people can typically afford:

Better healthcare
More education
More varied food
Larger homes
More leisure activities
Longer life expectancy

But—and this is important—growth doesn't automatically improve everyone's standard of living equally. Who benefits from growth depends on how income is distributed.

The Business Cycle: Why Economies Fluctuate¶

Economies don't grow smoothly. They expand, slow down, contract, and expand again. This pattern is called the business cycle.

The four phases of the business cycle:

Expansion: Economy growing, employment rising, businesses thriving
Peak: Maximum point before decline begins
Contraction (Recession): Economy shrinking, job losses, business closures
Trough: Bottom point before recovery begins

A recession is officially defined as two consecutive quarters of declining real GDP. During recessions, unemployment rises, businesses struggle, and people become more pessimistic.

Phase	GDP Trend	Unemployment	Consumer Confidence
Expansion	Rising	Falling	High
Peak	Highest	Lowest	Very high
Contraction	Falling	Rising	Falling
Trough	Lowest	Highest	Very low

Diagram: Business Cycle Explorer¶

Business Cycle Explorer MicroSim

Type: microsim

Bloom Taxonomy Level: Understand (L2) Bloom Verb: explain, identify, interpret

Learning Objective: Students will identify the four phases of the business cycle and explain the characteristics of each phase.

Purpose: Visualize the business cycle with historical examples and interactive phase exploration.

Canvas Layout: - Main area (600px): Animated line graph showing GDP over time - Right panel (150px): Phase information and indicators

Visual Elements: - Wavy line showing business cycle pattern - Color-coded regions for each phase: - Green: Expansion - Yellow: Peak - Red: Contraction - Orange: Trough - Moving indicator dot showing "current" position - Historical event markers (2008 recession, COVID recession, etc.) - Economic indicators panel showing unemployment, confidence, stock market

Data Visibility Requirements: - Stage 1: Full cycle visible with phases labeled - Stage 2: Click on Expansion - show characteristics panel - Stage 3: Click on Recession - show what happens, historical examples - Stage 4: Animate through complete cycle showing how indicators change

Interactive Controls: - Click on any phase to see detailed information - "Play animation" button to watch cycle progress - Speed control for animation - "Show historical data" toggle overlays real US GDP - Year range selector (1990-present)

Behavior: - Clicking phase highlights that section and shows: - Definition of the phase - What happens to employment, prices, confidence - How businesses typically respond - Historical example with date - Animation shows dot moving through cycle with real-time indicator updates - Historical overlay shows actual recessions marked

Instructional Rationale: Visual representation of the abstract business cycle concept, combined with historical grounding, helps students understand that cycles are normal and identify current economic conditions.

Implementation: p5.js with animated line, click regions, and data overlays

Why Do Economies Fluctuate?¶

Several factors cause business cycles:

Consumer confidence: When people feel optimistic, they spend more, boosting the economy
Business investment: Companies expand when they expect good times, contract when worried
External shocks: Oil price spikes, pandemics, wars, natural disasters
Policy changes: Interest rates, taxes, government spending all affect cycles
Financial factors: Credit availability, banking stability, asset bubbles

Aggregate Demand: Total Spending¶

Now let's connect individual markets to the whole economy. Aggregate demand is the total quantity of goods and services demanded in an economy at different overall price levels.

It's like the demand curve from microeconomics, but for the entire economy—all goods and services combined.

The aggregate demand curve slopes downward: when the overall price level falls, people can afford to buy more stuff.

Aggregate demand has the same components as GDP (using the expenditure approach):

$$AD = C + I + G + (X - M)$$

Changes in any of these components shift aggregate demand:

Consumers become more confident → C rises → AD shifts right
Businesses cut investment → I falls → AD shifts left
Government increases spending → G rises → AD shifts right
Foreign demand for our exports rises → (X-M) rises → AD shifts right

Aggregate Supply: Total Production¶

Aggregate supply is the total quantity of goods and services that producers are willing and able to supply at different overall price levels.

There are two versions:

Short-run aggregate supply (SRAS): Slopes upward (higher prices encourage more production in the short run)
Long-run aggregate supply (LRAS): Vertical line at the economy's potential output (in the long run, production is determined by resources and technology, not prices)

When aggregate demand and aggregate supply intersect, we get the economy's equilibrium output and price level—the big picture equivalent of market equilibrium.

Diagram: Aggregate Demand and Supply¶

AD-AS Model MicroSim

Type: microsim

Bloom Taxonomy Level: Apply (L3) Bloom Verb: demonstrate, use, apply

Learning Objective: Students will apply the AD-AS model to demonstrate how changes in aggregate demand or supply affect output and price levels.

Purpose: Interactive exploration of how economic shocks move the whole economy.

Canvas Layout: - Left side (450px): AD-AS graph - Right side (200px): Controls and outcome display

Visual Elements: - X-axis: Real GDP (Output) - Y-axis: Price Level - Downward-sloping AD curve (blue) - Upward-sloping SRAS curve (red) - Vertical LRAS line (green, dashed) - Equilibrium point clearly marked - Shaded regions showing inflation/recession zones

Interactive Controls: - Dropdown: Select scenario - "Consumer confidence boost" (AD shifts right) - "Oil price shock" (SRAS shifts left) - "Government stimulus" (AD shifts right) - "Technology improvement" (SRAS shifts right, LRAS shifts right) - "Pandemic lockdown" (both AD and SRAS shift left) - Slider: Magnitude of shift (small/medium/large) - "Apply shock" button - Reset button

Behavior: - Selecting scenario and clicking "Apply" animates the curve shift - New equilibrium point highlighted - Outcome panel shows: - Change in output (GDP effect) - Change in price level (inflation effect) - Employment impact - Real-world example of similar event - Can stack multiple shocks to see combined effects

Instructional Rationale: The AD-AS model is fundamental for understanding macroeconomic policy. Interactive manipulation helps students see cause-and-effect relationships between economic shocks and outcomes.

Implementation: p5.js with animated curve shifts and real-time equilibrium calculation

The Multiplier Effect: Small Changes, Big Impact¶

Here's something cool about macroeconomics: spending ripples through the economy.

The multiplier effect occurs when an initial change in spending leads to a larger final change in GDP.

Here's how it works: Suppose the government spends $100 million building a new bridge. The construction workers earn that money—but they don't just stuff it under their mattresses. They spend most of it! Maybe they spend 80% ($80 million) on food, housing, and entertainment.

Now the grocers, landlords, and movie theaters have earned $80 million. They spend 80% of that ($64 million). And so on.

Round	New Spending	Cumulative Total
Initial government spending	$100 million	$100 million
Construction workers spend	$80 million	$180 million
Those recipients spend	$64 million	$244 million
Next round	$51 million	$295 million
And so on...	...	...
Final Total	—	$500 million

That $100 million initial spending created $500 million in total economic activity! The multiplier was 5.

The formula:

$$\text{Multiplier} = \frac{1}{1 - MPC}$$

Where MPC = Marginal Propensity to Consume (the fraction of extra income that gets spent).

If people spend 80% of each extra dollar (MPC = 0.8), the multiplier is 1/(1-0.8) = 1/0.2 = 5.

Diagram: Multiplier Effect Simulator¶

Multiplier Effect Simulator MicroSim

Type: microsim

Bloom Taxonomy Level: Apply (L3) Bloom Verb: calculate, demonstrate, apply

Learning Objective: Students will calculate the multiplier effect and demonstrate how an initial spending injection ripples through the economy.

Purpose: Visualize the multiplier process with step-by-step spending rounds.

Canvas Layout: - Left side (400px): Animated visualization of money flowing through economy - Right side (250px): Controls and running totals

Visual Elements: - Circular nodes representing economic actors (government, workers, businesses, consumers) - Animated money particles flowing between nodes - Shrinking money stacks showing each round's spending - Running total bar that grows with each round - Multiplier value display

Data Visibility Requirements: - Stage 1: Initial injection amount shown - Stage 2: First round spending (show MPC calculation) - Stage 3: Second round (money getting smaller) - Stage 4: Continue until amount becomes negligible - Stage 5: Final total with multiplier revealed

Interactive Controls: - Slider: Initial spending amount ($10 million - $100 million) - Slider: MPC (0.5 - 0.95) - "Inject spending" button to start animation - "Step through" vs "Auto-play" toggle - "Show formula" button - Reset button

Default Parameters: - Initial spending: $50 million - MPC: 0.8 - Multiplier: 5 - Expected final impact: $250 million

Behavior: - Click "Inject spending" to begin animation - Money particles flow from node to node - Each round shows calculation: Previous × MPC = This round - Cumulative total updates - Animation slows as amounts get small - Final display: "Your $X million created $Y million in total economic activity!" - Shows multiplier formula and calculation

Instructional Rationale: Visualizing money flowing through multiple rounds makes the abstract multiplier concept tangible. Students can experiment with different MPC values to see how saving rates affect the multiplier.

Implementation: p5.js with particle animation and step-through capability

Crowding Out: When Government Borrowing Has Costs¶

The multiplier sounds great for government stimulus, but there's a catch: crowding out.

Crowding out occurs when increased government borrowing raises interest rates, which reduces private investment.

Here's the logic:

Government wants to spend more than it collects in taxes
Government borrows money (sells bonds)
More demand for borrowed funds pushes interest rates up
Higher interest rates make it more expensive for businesses to borrow
Businesses cut back on investment
The private investment decline partially offsets the government spending increase

Crowding out doesn't eliminate the benefits of government spending, but it does reduce them. The net effect depends on economic conditions—crowding out is typically less of a problem during recessions when private investment demand is already low.

The Crowding Out Debate

Economists disagree about how strong crowding out effects are. Some argue government spending crowds out private investment almost dollar-for-dollar. Others argue that during recessions, there's so much unused capacity that crowding out is minimal. This is one of the big debates in macroeconomic policy.

Critical Thinking: Questioning Economic Numbers¶

Now that you understand how we measure the economy, let's sharpen your ability to spot manipulation.

Red Flag #1: Nominal vs. Real Confusion¶

When someone cites impressive GDP growth, ask: Is that nominal or real? Nominal growth during high inflation isn't real growth.

Red Flag #2: Cherry-Picked Time Periods¶

Economic data looks different depending on your start and end dates. Someone could claim "the economy grew 15%!" by choosing a recession start point and boom end point. Always ask: What time period? Why those dates?

Red Flag #3: Total vs. Per Capita¶

"China's economy is larger than America's!" (Maybe in total, but not per person.) "Our state's GDP grew faster than California's!" (But what about population growth?) Always consider whether total or per capita is the relevant comparison.

Red Flag #4: GDP as the Only Measure¶

GDP measures production, not well-being. A country could have rising GDP while happiness falls, inequality grows, or the environment degrades. GDP is one important number, but it's not everything.

Practice: Spot the Manipulation

A politician says: "Under my leadership, GDP grew from $20 trillion to $25 trillion—that's 25% growth!" But this was over 6 years with average 3% annual inflation. What questions should you ask?

You should ask: 1. Is this nominal or real GDP? 2. What was real GDP growth after adjusting for inflation? 3. What was the population change? (Per capita growth matters) 4. How does this compare to previous periods or other countries? 5. What were global conditions during this time?

Key Takeaways¶

You've now unlocked major macroeconomic superpowers:

GDP measures total economic output—useful but imperfect
Nominal GDP uses current prices; Real GDP adjusts for inflation—always use real for meaningful comparisons
Per capita GDP divides by population for fair country comparisons
Economic growth is the increase in real GDP over time—small differences compound dramatically
Standard of living reflects material well-being—affected by growth but also distribution
The business cycle shows economies naturally fluctuate through expansion, peak, contraction, and trough
Aggregate demand = total spending in the economy (C + I + G + NX)
Aggregate supply = total production capacity (vertical in long run)
The multiplier effect means initial spending creates larger total impact
Crowding out can reduce effectiveness of government borrowing
GDP doesn't measure everything—happiness, environment, inequality are separate questions
Question economic numbers—check nominal vs. real, time periods, and per capita

Practice Questions¶

Test your understanding:

A country's nominal GDP grew 7% while inflation was 4%. What was real GDP growth?
Country A has GDP of $5 trillion and 100 million people. Country B has GDP of $8 trillion and 400 million people. Which has higher standard of living on average?
If the MPC is 0.75, what is the spending multiplier? How much total GDP impact would a $40 billion government spending increase create?
During a recession, is crowding out more or less of a concern? Why?
Someone claims: "Our economy is the best ever—nominal GDP hit a record high!" What questions should you ask to evaluate this claim?

Next Steps¶

Now that you understand how we measure the economy and what drives fluctuations, you're ready to explore what governments can do about it. In the next chapter, we'll examine Money, Banking, and Monetary Policy—how the Federal Reserve influences the economy through interest rates and the money supply.

Your economic superpower is growing. You can now read economic news and actually understand what the numbers mean—and more importantly, what they don't mean.