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and businesses every day is how to judge th… Show more A r

Paper help Economics and businesses every day is how to judge th… Show more A r

Economics

and businesses every day is how to judge th… Show more A r

and businesses every day is how to judge th… Show more 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 $17.0 trillion in 2015. Now fill in the remaining columns of the table by answering the following questions. (a) What is potential output in 2015? You could call this a trick question, since there%u2019s no way for you to know the answer! In a way, that%u2019s the main point: fundamentally, we have to take some other measurements and make some assumptions. Suppose your research assistant tells you that in 2015, busi- ness surveys, unemployment reports, and recent years%u2019 experience suggest that the economy is operating at potential output. So go ahead and write 17.0 for potential in this year. (b) Assume potential output grows at a constant annual rate of 3.5%, 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? • Show less

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