How does the world GDP increase? The world GDP tends to increase on average every year (exception being years of global recession). If in year x the world GDP was 100 million dollars, how can the world GDP in year x+1 be, let's say, 105 million dollars? This would mean that 5 million dollars were printed. Am I correct to assume that the increase in GDP is exclusively caused by inflation? Otherwise, how (even if much more goods and services were produced) would the world GDP increase if the money supply remained constant?
Am I correct to assume that the increase in GDP is exclusively caused by inflation?
World GDP increases when the world produces more in one year than it did the year before. Inflation means (among other things) that prices increase.
Suppose this year the world produces 10 apples valued at two dollars each. Suppose next year the world produces 11 apples still at two dollars each. In that case, real and nominal GDP growth is 10%.
If the price of apples increases, then nominal GDP growth will be more than 10%, but real GDP growth, which filters out price fluctuations, will still be 10%.