If a country wanted to increase their GDB tenfold, could it just increase salaries by ten, force companies to pay ten times more and spend 10 times more in every field as well ? So that everything is increased proportionally, thus making the GDP grow.

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If a country wanted to increase their GDB tenfold, could it just increase salaries by ten, force companies to pay ten times more and spend 10 times more in every field as well ? So that everything is increased proportionally, thus making the GDP grow.

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And then every company that can’t afford a 10x increase in payroll goes out of business and you just destroyed your economy.

That’s inflation, and the GDP figured you typically see account for it. “Real” GDP accounts for inflation, and so the Real GDP of your hypothetical country would be completely unchanged.

Except, of course, that in doing this they would create all sort of financial chaos and uncertainty and cause their Real GDP to *plummet*.

On the short run – until total adoption – it’d cause a great amount of economical damage.
After some time it’d just deflate the value of currency tenfold first, but assumably it’d not stop there, since nobody would know what’s the cause of this, and there you’d have the infamous hyperinflation, basically meaning you’ve just destroyed everything at that point.

because it would effectively change nothing, you just inflated your economy by 10x but because GDP accounts for inflation unless your internal economy also grown by 10x(it won’t) people just buy from foreign nations at less than 10x cost.

this would in turn put quite a few companies out of business if they ran in this inflated economy.

so at the end if anything doing that woudl cause GDP to Plummet due to the chaos it would induce

GDP is almost always quoted in a foreign currency usually dollars. So while in your scenario the GDP in your own currency would indeed increase in other currencies it would at least not meaningfully change from before and in reality likely drop from the cost of implementing anything.

In the local currency yes, but GDP is tipically measured in USD and that would create a tenfold inflation so the local currency would devalue tenfold relative to the USD and the GDP would remain the same.

What happens to deposits? If you revalue all the money in banks by 10X, then you’ve devalued your currency and measures of your GDP won’t change.

This more often operates in the other direction, currencies are reduced by something like 1000 to compensate for past inflation. For example, Zimbabwe revalued their currency in 2019.

No, because that would cause the exchange rate to go up 10x, and the real purchasing power wouldn’t change. This sort of thing is why PPP was invented, to account for currency fluctuations and cost of living.

as the top comment explained. Nominal GDP will increase. Real GDP will not because the workers aren’t being 10× productive.