to Ỹ: A real-world problem faced by policymakers, forecasters, 7. Measuring Y, and and businesses every day is how to judge the state of the economy. Consider the table below, showing hypothetical measures of real GDP in the coming years, starting at a level of $18.0 trillion in 2018. Year 2018 2019 2020 2021 2022 2023 2024 Actual output Y₁ 18.00 18.60 19.00 18.90 19.00 20.00 20.90 Potential output Y₁ Y₁ - Y₁ Short-run output Y₁ Growth rate of actual output %AY Now fill in the remaining columns of the table by answering the following questions. (a) What is potential output in 2018? You could call this a trick question, since there's no way for you to know the answer! In a way, that's the main point: fundamentally, we have to take some other measurements and make some assumptions. Suppose your research assistant tells you that in 2018, business surveys, unemployment reports, and recent years' experience sug- gest that the economy is operating at potential output. So go ahead and write 18.0 for potential in this year. (b) Assume potential output grows at a constant annual rate of 2.5%, and complete the remainder of the table. (c) Comment on the state of the economy in each year. When does the economy enter a recession? When does the recession end? (d) How is your answer in part (c) related to the growth rate of actual output in the last column of the table?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question

The answer should be typed. 

 

locka
to the U.S. economy.
7. Measuring Y, and Ỹ,: A real-world problem faced by policymakers, forecasters,
and businesses every day is how to judge the state of the economy. Consider
the table below, showing hypothetical measures of real GDP in the coming
years, starting at a level of $18.0 trillion in 2018.
Year
2018
2019
2020
2021
2022
2023
2024
Actual
output
Y₁
18.00
18.60
19.00
18.90
19.00
20.00
20.90
Potential
output
Y₁
Y₁ - Y₁
Short-run
output
Y₁
Growth rate
of actual
output %4Y
Now fill in the remaining columns of the table by answering the following
questions.
(a) What is potential output in 2018? You could call this a trick question,
since there's no way for you to know the answer! In a way, that's the main
point: fundamentally, we have to take some other measurements and make
some assumptions. Suppose your research assistant tells you that in 2018,
business surveys, unemployment reports, and recent years' experience sug-
that the economy is operating at potential output. So go ahead and
write 18.0 for potential in this year.
gest
(b) Assume potential output grows at a constant annual rate of 2.5%, and
complete the remainder of the table.
(c) Comment on the state of the economy in each year. When does the
economy enter a recession? When does the recession end?
(d) How is your answer in part (c) related to the growth rate of actual output
in the last column of the table?
Transcribed Image Text:locka to the U.S. economy. 7. Measuring Y, and Ỹ,: A real-world problem faced by policymakers, forecasters, and businesses every day is how to judge the state of the economy. Consider the table below, showing hypothetical measures of real GDP in the coming years, starting at a level of $18.0 trillion in 2018. Year 2018 2019 2020 2021 2022 2023 2024 Actual output Y₁ 18.00 18.60 19.00 18.90 19.00 20.00 20.90 Potential output Y₁ Y₁ - Y₁ Short-run output Y₁ Growth rate of actual output %4Y Now fill in the remaining columns of the table by answering the following questions. (a) What is potential output in 2018? You could call this a trick question, since there's no way for you to know the answer! In a way, that's the main point: fundamentally, we have to take some other measurements and make some assumptions. Suppose your research assistant tells you that in 2018, business surveys, unemployment reports, and recent years' experience sug- that the economy is operating at potential output. So go ahead and write 18.0 for potential in this year. gest (b) Assume potential output grows at a constant annual rate of 2.5%, and complete the remainder of the table. (c) Comment on the state of the economy in each year. When does the economy enter a recession? When does the recession end? (d) How is your answer in part (c) related to the growth rate of actual output in the last column of the table?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 6 steps with 2 images

Blurred answer
Knowledge Booster
Investment Schedule
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education