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Economic

Hi, 

I would like to know what theory in economics suggest that with an increase in GDP there is a consequential multifold increase in discretionary income?

real gdp has been increasing 3 percent per year. but real household income has been roughly flat since 1960s. 

I love my cheese. I got to have my cheddar.

Nerdyblop wrote:

real gdp has been increasing 3 percent per year. but real household income has been roughly flat since 1960s. 

Real Median HH Income (+0.6%pa, 37%)

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Real Mean HH Income (+1.1%pa, 72%)

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Aastha Jha wrote:

Hi, 

I would like to know what theory in economics suggest that with an increase in GDP there is a consequential multifold increase in discretionary income?

There’s no theory that suggests a “multifold increase”.  Over time based on the simple math of the GDP equation, gains in GDP will ultimately be divided between people and corporations assuming governments run neutral to deficit budgets like a non-profit (vs perpetual surplus).  Over time the ratio between people and companies will vary but should be semi range bound since neither will work for free in the current system.  In other words, over a very long time period, corporate profits and incomes should grow AT GDP levels, although in the past few decades the ratio of GDP going to households has fallen as corporate productivity has risen.

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