3 ms·
An interesting thing about percentage change in GDP is it's worse on the downside than the upside. If GDP falls 40% one year, then rises 40% next year, it's not
by logicchains 6y ago
An interesting thing about percentage change in GDP is it's worse on the downside than the upside. If GDP falls 40% one year, then rises 40% next year, it's not back at 100% of what it was before, it's actually only back to 84% (1.4 * 0.6).
- kenniskrag 6y agonot only for GDP but also for stocks. People assume if they loose 10% they need a 10% gain but that is not true: https://static.seekingalpha.com/uploads/2018/11/8/saupload_iwae-2.jpg https://static.seekingalpha.com/uploads/2018/11/8/saupload_i...
- parenthesis 6y agoEasy way to convince people of this: after a 50% fall you need to double (up 100%) to get back to where you started.
- kraghen 6y agoI sometimes wonder if using logarithms would be more appropriate in most cases. Then we can simply add up the numbers as one "would expect". We could choose the base to be ~2.7048138 such that 1% regular growth corresponds to 1% logarithmic growth. For low percentages they would mostly agree. But +40% would become +34% while -40% would become -51%, thus making the combined effect more apparent.
- barbegal 6y agoIt's one of the reasons why decibels and logarithmic scales are so useful. A drop of -2dB and a gain of +2dB gets you back to where you started.