Suppose that the annual rates of growth of real GDP of Econoland over a five-yea

Question

Suppose that the annual rates of growth of real GDP of Econoland over a five-year period are as follows:




Year

Growth Rate



1

4%



2

2%



3

-2%



4

4%



5

6%


What was the average of these growth rates in Econoland over these 5 years?

Instructions: Round your answer to one decimal place.

%

What term would economists use to describe what happened in year 3? (Click to select)? Expansion OR Recession

If the growth rate in year 3 had been a positive 5 percent rather than a negative 2 percent, what would have been the average growth rate? %

Explanation / Answer

1) Average growth rate = Sum of all growth rates over the five years/5 = 2.8 2) The phenomenon in year 3 is call recession. Since, it is negative growth. 3) If growth rate in year 3 had been 5% average growth rate would have been = 4.2 and geometric mean would be 3.9%

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