Question

1. Business Cycles [RGDP is in billions of 2012 dollars; the interest rate cited is the Prime Rate]

Date	RGDP	U	i	Column1
1/1/1960	3275.76	5.2	5	Peak
1/1/1961	3253.83	6.8	4.5	Trough
10/1/1969	4943.94	3.6	8.5	Peak
10/1/1970	4935.69	5.8	7.23	Trough
10/1/1973	5727.96	4.8	9.81	Peak
1/1/1975	5548.16	8.3	8.98	Trough
1/1/1980	6837.64	6.3	16.4	Peak
7/1/1980	6688.79	7.7	11.61	Trough
7/1/1981	6978.14	7.4	20.32	Peak
10/1/1982	6802.5	10.7	11.96	Trough
7/1/1990	9398.5	5.7	10	Peak

1. Determine how much the economy grew in each cycle (from one peak to the next).
2. Determine how much RGDP fell in each recession (from peak to trough)
3. How much to did unemployment rise in each recession? How much did the interest rate fall?
4. What was the overall annual growth rate for the economy from January 1960 to July 1990?

Answer 1

a.

Date	RGDP
01/01/1960	3275.76		Peak
01/01/1961	3253.83		Trough
10/01/1969	4943.94	51% [ (4943.94 / 3275.76 ) -1 ] * 100	Peak
10/01/1970	4935.69		Trough
10/01/1973	5727.96	16%	Peak
01/01/1975	5548.16		Trough
01/01/1980	6837.64	19%	Peak
07/01/1980	6688.79		Trough
07/01/1981	6978.14	2%	Peak
10/01/1982	6802.5		Trough
07/01/1990	9398.5	35%	Peak

Will take the growth rate from one peak to the next as the economy grew in each cycle, from one peak to the next peak. The cycle kept on inching higher.

b.

Date	RGDP		Fell from Peak to trough
01/01/1960	3275.76
01/01/1961	3253.83		-1% [ ( 3253.83 / 3275.76 ) -1 ] * 100
10/01/1969	4943.94	51%
10/01/1970	4935.69		0%
10/01/1973	5727.96	16%
01/01/1975	5548.16		-3% [ ( 5548.16 / 5727.96 ) -1 ] * 100
01/01/1980	6837.64	19%
07/01/1980	6688.79		-2%
07/01/1981	6978.14	2%
10/01/1982	6802.5		-3%
07/01/1990	9398.5	35%

c.

Date	U	Absolute rise	% rise
01/01/1960	5.2			Peak
01/01/1961	6.8	1.6 ( 6.8 - 5.2 )	31% [ ( 6.8 / 5.2 ) - 1 ] *100	Trough
10/01/1969	3.6			Peak
10/01/1970	5.8	2.2	61%	Trough
10/01/1973	4.8			Peak
01/01/1975	8.3	3.5	73%	Trough
01/01/1980	6.3			Peak
07/01/1980	7.7	1.4	22%	Trough
07/01/1981	7.4			Peak
10/01/1982	10.7	3.3	45%	Trough
07/01/1990	5.7			Peak

Date	I
01/01/1960	5		Peak
01/01/1961	4.5	-0.5 (4.5 - 5)	Trough
10/01/1969	8.5		Peak
10/01/1970	7.23	-1.27	Trough
10/01/1973	9.81		Peak
01/01/1975	8.98	-0.83	Trough
01/01/1980	16.4		Peak
07/01/1980	11.61	-4.79	Trough
07/01/1981	20.32		Peak
10/01/1982	11.96	-8.36	Trough
07/01/1990	10		Peak

d. The overall annual growth rate for the economy from January 1960 to July 1990 was [ (9398.5 / 3275.76 ) - 1 ] * 100

= [ 2.869 - 1 ] * 100 = 1.869 * 100 = 187%