3. GDP trend and cycle: See Table 2 which shows UK real GDP per capita. Suppose

Question

3. GDP trend and cycle: See Table 2 which shows UK real GDP per capita. Suppose that the economy was at its trend in 2003. Suppose also that trend growth is one percent per year. Calculate the cycle using the formula Cycle = log (GDP)-log (Trend) In which years was the economy below trend? In which years was the economy above trend? What units is the cycle measured in? What year was the economy furthest above trend? In what year was the economy furthest below trend? If growth in 2015 and beyond was a constant two percent per year, in what year would the economy again be above trend? (Hint: Copy the data into ercel and convert the data into log-evels). EC2002 (2018/19): Tutorial 1 Week 3 Table 2: UK real GDP per capita (£'000s) Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 GDP 25.125.6 26.2 26.7 27.2 26.8 25.5 25.7 26.0 26.1 26.5 27.1

Explanation / Answer

(GDP) is a monetary measure of the market value of all the final goods and services produced in a period of time, often annually or quarterly. Nominal GDP estimates are commonly used to determine the economic performance of a whole country or region, and to make international comparisons.

GDP (nominal) per capita does not, however, reflect differences in the cost of living and the inflation rates of the countries; therefore using a basis of GDP per capita at purchasing power parity (PPP) is arguably more useful when comparing differences in living standards between nations.

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.