Question

Question 1. (Excel exercise) The Federal Reserve Bank of St. Louis offers a wide range of economic data at its Web site, called FRED (fred.stlouisfed.org/). Use these data to examine real GDP for Canada from 1960 to 2011.
a. Download annual data (CANRGDPR) on real GDP from 1960 to 2011. Calculate the annual growth rates, starting with 1960. Are there years in which real GDP decreased? With what events are these years associated?
b. Calculate the average rate of real GDP growth for the period from 1960 to the most recent year available. Calculate the average annual growth rate from 2008 to 2010. How does the growth rate during this three-year period compare to the average growth rate from 1960 to 2011?

Answer 1

a.

The data and reason for negative growth rate is as follows:

Year	Real GDP in Canada , Millions of 2011 U.S. Dollars, Annual, Not Seasonally Adjusted	Annual Growth rate of Real GDP	Reasons for Negative Annual Real GDP growth rate	Year	Real GDP in Canada , Millions of 2011 U.S. Dollars, Annual, Not Seasonally Adjusted	Annual Growth rate of Real GDP	Reasons for Negative Annual Real GDP growth rate
1960	263862	-		1986	754708	2%
1961	272134	3%		1987	786808	4%
1962	291167	7%		1988	825947	5%
1963	306618	5%		1989	847582	3%
1964	326471	6%		1990	849218	0%
1965	347260	6%		1991	831451	-2%	The early 1990s recession describes the period of economic downturn affecting much of the Western world in the early 1990s, believed to be caused by restrictive monetary policy enacted by central banks primarily in response to inflation concerns, the loss of consumer and business confidence as a result of the 1990 oil price shock, the end of the Cold War and the subsequent decrease in defense spending, the savings and loan crisis and a slump in office construction resulting from overbuilding during the 1980s.
1966	370336	7%		1992	838728	1%
1967	381132	3%		1993	858342	2%
1968	399731	5%		1994	899578	5%
1969	419849	5%		1995	924843	3%
1970	432572	3%		1996	939814	2%
1971	450384	4%		1997	979530	4%
1972	474912	5%		1998	1019665	4%
1973	507986	7%		1999	1076071	6%
1974	526735	4%		2000	1132385	5%
1975	536338	2%		2001	1152584	2%
1976	564223	5%		2002	1186292	3%
1977	583735	3%		2003	1208607	2%
1978	606814	4%		2004	1246315	3%
1979	629903	4%		2005	1283942	3%
1980	643525	2%		2006	1320188	3%
1981	666069	4%		2007	1349232	2%
1982	647026	-3%	The early 1980s recession was a severe global economic recession that affected much of the developed world in the late 1970s and early 1980s. In the early 1980s, Canada experienced higher inflation, interest rates, and more underemployment than the United States.	2008	1358525	1%
1983	664611	3%		2009	1320897	-3%	Financial Crisis 2008-09
1984	703254	6%		2010	1363363	3%
1985	736870	5%		2011	1396160	2%

b.

Year	Real GDP in Canada, Millions of 2011 U.S. Dollars, Annual, Not Seasonally Adjusted
1960	263862
2011	1396160

The number of Years between 1960 and 2011 is 52 Years

Let the average annual growth rate of real GDP is r% per annum

The average rate of real GDP growth rate for 1960 to 2011 is:

(1396160/263862) = (1+r)^52

1 + r =1.032558303

Hence, r = 0.032558303 or 3.2558303%

Thus, the average annual growth rate of real GDP is 3.2558303% per annum

Year	Real GDP in Canada , Millions of 2011 U.S. Dollars, Annual, Not Seasonally Adjusted
2008	1358525
2010	1363363

The number of Years between 2008 and 2010 is 3 Years

Let the average annual growth rate of real GDP is x% per annum

The average rate of real GDP growth rate for 2008 to 2010 is:

(1363363/1358525) = (1+x)^3

1 + x =1.001185665

Hence, x = 0.001185665 or 0.1185665%

Thus, the average annual growth rate of real GDP between 2008 and 2010 is 0.1185665% per annum

Thus, the average annual growth rate of real GDP from 2006 to 2011 is 27.45994 times of the average annual growth rate of real GDP between 2008 and 2010