Between 2000 and 2007, productivity increased at almost twice the rate of real wages.
If China seeks to maintain historical rates of real growth, then inflation will accelerate.
Obviously, in reality we would expect both the rate of growth and the rate of real exchange-rate appreciation to slow as China catches up with America.
"As recently as the second quarter of 2000, the year-over-year growth rate of real G.D.P. in America was 6.1percentt," he said.
Chart 2 shows, for each quarter since the beginning of 2000, the average growth rate of real G.D.P. over the previous five years.
They found that the growth rate of real, or inflation-adjusted, earnings is relatively constant when measured over several-year periods.
But the professors say nominal earnings historically have grown faster when inflation is rising, keeping the growth rate of real earnings more or less constant.
Players are told the growth rate of real GDP, the inflation rate, the growth in the money supply and the level of joblessness.
"Investors are desperate to find a place to put their money that offers an above-average rate of real economic growth," he said.
