EC309 Test 1
Residential fixed investment tends to move ahead of real GDP.
Does the behavior of the housing sector provide any indications about the business cycle?
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.
How has the role of the housing sector for investment activity changed in the last 10 years?
8 months. Productivity contracted for only one quarter.
How long did the 2001 recession last? What observations about productivity did we observe during the 2001 recession?
25%
How much of the worldwide GDP comes from the United States?
Investment contracted at a 50% clip during the 1973-1975 Recession
Ignoring the pandemic, what is the highest rate of contraction?
11 months
Since 1950, how long does the average recession last?
2.8%, 2.0%
The average rate of productivity growth in the 1960s was _____, but in the 1970s _____.
3.4%, 1.8%
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.
2.0%
What is the average rate of productivity growth in the United States since 1960?
3.0% for GDP growth and 5.3% for investment
What is the average rate/trend rate of economic growth in the United States from 1960-2022? By comparison, what is the trend rate of growth for private domestic investment over the same timeframe?
1947: Overall inflation peaked at 20%
What is the highest overall inflation rate that has occurred in the United States during the postwar period? And when?
Volume of trade is more than 1/4 of the size of GDP
What is the total volume of trade relative to GDP?
Equipment
What represents the largest component of private fixed investment?
Equipment spending contracted during the recession. The equipment sector appeared to be in "recession" for over two years.
What was the role of equipment spending during the 2001 recession and the following economic recovery?
Peak: 16.4% in 1978 Trough: -8.4% in 2008
What were the peaks and troughs for GDP growth?
Productivity contracts for at least one quarter.
Which of the following occurs in a recession?
Profits = Total Revenue - Total Cost =p*A*F(K,L)-W*L - R*K W= Wages, L= # of hours, R= Rested Rate, K= Total stock of capital
Write down and explain the expression for firm profits. How do firms choose the number of workers to hire? Explain each term in the algebraic expression.
8.3%
According to the most recent data for August 2022, the inflation rate as measured by the consumer price index is:
Residential Fixed Investment
Based upon the relative peaks and troughs of activity, which component of GDP is the most volatile?
GDP of 23 trillion
How big is the U.S economy?
The production of goods that will be used to produce other products.
How do economists define investment?
3 categories. Labor (L), Capital (K), and productivity (A).
How do macroeconomists characterize the different factors that affect total output in the economy? Provide brief explanation.
