ECON 309 Test 1

What has been the lowest rate of growth?

-8.4% in 2008

What is the average rate of productivity growth during this current decade?

1.3% (lowest in a long time)

What was the average rate of growth in the first decade of the 21st century?

1.8%

What is the average rate of productivity growth for the past year?

1.9%

How much does private domestic investment (PDI) account for GDP? Does PDI forecast the economy?

1/6 comes from Private Domestic Investment. Yes PDI forecasts the economy, it is one of the biggest drivers of the business cycle

What is the average rate of growth in the 21st century?

2.0%

What is the average rate of productivity growth during the 21st century?

2.0%

What is the average rate of productivity growth in the United States since 1960?

2.0%

What is the average rate of productivity growth during Pre Great Moderation?

2.2%

What is the average rate of productivity growth during the Great Moderation?

2.2% (same as Pre)

What has been the average rate of growth since the end of the Great Recession?

2.3%

The average rate of productivity growth in the 1960s was _____, but in the 1970s _____. a. 1.8%, 2.8% b. 1.1%, 2.2% c. 2.8%, 1.8% d. 1.8%, 1.5%

2.8%, 1.8%

How much of the worldwide GDP comes from the United States? a. 25% b. 10% c. 5% d. 40%

25%

What is the average rate of growth from 1960-2019?

3.1%

What was the average rate of growth during the 1980s?

3.2%

What is the average rate of growth of Consumption since 1960-2019?

3.3%

What was the average rate of growth during the Great Moderation?

3.3%

What was the average rate of growth during the 1970s?

3.4%

What was the average rate of growth in the 1990s?

3.4%

The average rates of GDP growth in the United States during the 1970s, 1980s, and 1990s were around _________. By comparison, it was ________ from 2000-2009. a. 2.0%, 3.2% b. 3.4%, 1.8% c. 4.0%, 3.4% d. 2.0%, 1.0%

3.4%, 1.8%

What was the average rate of growth of Consumption during the Great Moderation?

3.5%

What was the unemployment rate in September? How many jobs were added?

3.5%, +136,000

What was the unemployment rate in August? How many jobs were added?

3.7%, +130,000 but revised to 168,000

What was the average rate of growth in the 1960s?

4.5%

What was the average rate of growth for Investment during the Great Moderation?

4.7%

What was the average rate of growth for Investment from 1960-2019?

5.2%

What was the average inflation rate during Pre-Great Moderation? Great Moderation? 21st Century?

5.3%, 3.1%, 2.1%

What has been the highest rate of growth since the Great Recession? What has been the lowest?

5.5% in 2014 -8.4 during Great Recession

What was the highest rate of growth for investment from 1960-2019?

55% in 1971

Number of Recessions in: 1960s- 1970s- 1980s- 1990s- 2000s- 2010s-

60s-2 70s-2 80s-2 90s-1 00s-2 10s-0

The 2001 recession lasted around ______ months. However, the Great Recession was ______ months long. a. 6, 12 b. 10, 20 c. 8, 17 d. 9, 15

8, 17

What was the highest rate of growth during the Great Moderation? What was the lowest during the Great Moderation?

8.0% in 1984 -3.5% in 1990

How has the economy performed over the past year?

Average rate of growth for GDP was 2.3% this year and the previous year was 3.2%. The trend rate is 2.0%, which puts the year over trend. We are in a "slowdown" period

Why is the Consumer Price Index used as an indicator of inflation over GDP deflator?

Because Consumer spending is the largest component of GDP and it is calculated monthly

How does equipment sector's behavior look during business cycles compared to the residential sector?

By comparison to residential investment, equipment's behavior is more similar to consumption growth over the business cycles

What is the largest component of GDP? What is the largest sector of this component?

Consumer Spending, Services (2/3 of Consumer Spending)

How does Consumer Spending react during the 2001 Recession compared to other economic downturns?

Consumer spending doesn't go into a recession like it did during other recessions. Consumption growth remains positive the entire recession

Is consumption growth or GDP growth more stable?

Consumption growth appears more stable since the range between peaks and troughs is less than the range between GDP.

Does consumption growth follow or forecast the business cycle?

Consumption growth generally turns negative at some point during recessions, but it tends to follow the business cycle

How does investment perform relative to the business cycle?

Growth in investment starts to turn down before each recession and it's often negative before each recession. Investment growth can be a leading recession indicator

____________ represents the largest component of private fixed investment. a. Non-Residential Structures b. Equipment c. Residential Fixed Investment d. Consumer Durables

Equipment

What are the two biggest sub categories in investment?

Equipment and Residential Investment

What was the role of equipment spending during the 2001 Recession and the following economic recovery? For example, which of the following statements is true? a. Equipment spending contracted during the recession, but picked up immediately after the recession was over. b. Equipment spending contracted during the recession. The equipment sector appeared to be in "recession" for over two years. c. Equipment spending expanded during the recession, but activity declined during the "jobless recovery." d. Equipment spending did not contract during the recession.

Equipment spending contracted during the recession. The equipment sector appeared to be in "recession" for over two years.

How has the housing market been performing recently?

In the past year and a half it's been in recession

How did productivity growth perform from 1960-1980?

It experienced a gradual decrease (slowdown)

How has equipment spending performed in recent years?

It has been trending down since the end of 2017

What were the three time periods and what were there characteristics?

Pre-Great Moderation (1960-1983): 5 recessions every 5 years, the longest: 15 months, avg. rate of growth- 3.6% Great Moderation (1984-2007): 2 recessions every 12 years, avg. rate of growth- 3.3% 21st Century (2000-Now): 2 recessions, the longest: 17 months, avg. rate of growth- 2.0%z

Which of the following usually occurs in a recession? a. Consumer spending increases b. Residential fixed investment increases c. Productivity contracts for at least one quarter d. Productivity growth increases

Productivity contracts for at least one quarter

What is an important component of labor market performance?

Productivity growth

What is the Profit Maximization formula at its simplest and detailed?

Profits= Total Revenues-Total Costs =p*Y-w*L-R*K =p*A*F(L,K)-w*L-R*K

Based upon the relative peaks and troughs of activity, which component of GDP is the most volatile? a. Gross Private Domestic Fixed Investment b. Net Exports c. Personal Consumption Expenditures d. Residential Fixed Investment

Residential Fixed Investment

How has the role of the housing sector for investment activity changed in the last 10 years? For example, which of the following statements is true? a. Residential fixed investment currently averages around 1/3 of gross private domestic · stment, but it was only around 1/4-1/5 in 2005. b. Residential fixed investment currently averages 1/4-1/5 of gross private domestic investment but it was around 1/3 of gross private domestic investment in 2005. c. Residential fixed investment has been around 1/4-1/5 of gross private domestic investment - both before and after the Great Recession. d. Residential fixed investment has been around 1/3 of gross private domestic investment- both before and after the Great Recession.

Residential fixed investment currently averages 1/4-1/5 of gross private domestic investment but it was around 1/3 of gross private domestic investment in 2005.

Does the behavior of the housing sector provide any indications about the business cycle? For example, which of the following statements is true? a. Residential fixed investment tends to contract before the economy moves into recession. b. Residential fixed investment follows real GDP. c. Residential investment is the least volatile component of the investment sector. d. None of the above.

Residential fixed investment tends to contract before the economy moves into recession

The following periods reflect episodes where the U.S. economy experienced deflation. a. 2009 b. 1954-1955 c. 1973-1975 d. both (a) and (b)

both (a) and (b)

What is one reason the Great Moderation triggered in increase in productivity growth?

The invention of computers

What is the most volatile sector in the economy?

The investment component

Is the residential investment category more volatile or less volatile than investment?

The residential investment category is more volatile and drives the investment category

Does the residential investment category follow or forecast the business cycles?

The residential investment sector begins to experience a recession well in advance of the overall recession in the economy

GDP equation with percentage of make up

Y= Consumer Spending (2/3) + Investment (1/6) + Government Spending (1/6) + Net Exports (3%)

What is the production function?

Y=A*F(K,L)

Around the time of the Great Recession, residential fixed investment: a. contracted for 15 consecutive quarters b. contracted for 7 consecutive quarters c. expanded for 3 consecutive quarters d. contracted for 11 consecutive quarters

contracted for 15 consecutive quarters