Homework 2

Due: at the start of class on Wednesday, January 30

Hint: the formula on page 2 of the text is wrong – cross out the “-1”.

All of your growth rates and approximate growth rates need to show just one digit to the right of the decimal point.

1) Using the formula on pg. 2, determine the growth rate of real GDP for the year you were born in:

Year	Year	Real GDP
You Were Born In (t)
Before Your Birth (t-1)

Growth rate = __________

2) Do the same thing using the natural log and differencing technique discussed in class.

Year	Year	ln(Real GDP)
You Were Born In (t)
Before Your Birth (t-1)

Approximate Growth rate = ___________

Because the growth rates are small in numbers 1 and 2, your answers should be close.

3) Repeat question # 1 using this information:

Year	Year	Real GDP
Most Recent Year (t+i)
You Were Born In (t)

Total Growth Over This Period  = ___________________

4) Repeat question # 2 using this information:

Year	Year	ln(Real GDP)
Most Recent Year (t+i)
You Were Born In (t)

Approximate Total Growth Over This Period = ___________

Because the growth rates are larger in numbers 3 and 4, your answers should not be that close.

5) URL of the website where you found the data: ________________________

Hint: you may as well spend some time getting annual and quarterly real GDP data into a spreadsheet, since you’ll be using it again.