Real Gross Domestic Product (GDP)
Exercises

Questions and Exercises

1. Is it possible for nominal GDP to rise while at the same time real GDP declines? Briefly explain why or why not. To prove your case, access the data series for nominal GDP and for real GDP. See if you can find at least one quarter of one year in which nominal GDP rose while real GDP declined.

2. Did the Index of Leading Economic Indicators correctly forecast the beginning and the end of the U.S. recession, that started in July 1990 and ended in March 1991? To find out, access the data series for the Index Of Leading Economic Indicators and for real GDP. Plot the Index of Leading Economic Indicators and real GDP for 1990 and 1991 (note that real GDP is quarterly, while the Index is monthly). Interpret the data and briefly write up your answer.

This is best done as a small team project:

3. What was the best and the worst quarter since 1960 in terms of economic growth in the U.S.? Access the data series for real GDP and write down the quarter and the year with the best and the worst economic growth. Based on what you know about the economic history of the U.S. since 1960, briefly describe the economic and policy factors that you think help explain the best and the worst quarter performance.

4. The National Bureau of Economic Research (NBER) defines a recession to be "a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income and wholesale-retail trade." Previously, recessions had been defined as two or more successive quarters of the year in which real GDP declined. Go to the following websites at the NBER: http://www.nber.org/cycles.html, and http://www.nber.org/cycles/recessions.html and answer the following questions: (i) What is a growth recession? (ii) What four indicators does the NBER consider to be the most important in determining whether or not the economy has entered a recession? (iii) What was the role of the terrorist attack on September 11th in causing the recession of 2001? (iv) What do you think was the role of the second Iraq war in the economic recovery of 2003??

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