Macro-Econ

http://data.worldbank.org/data-catalog/world-development-indicators

   

Assignment is attached.

Econ 205
Professor Joel David
Fall 2013

Homework 6

The Great Recession

In this exercise, you will obtain and summarize data depicting the behavior of an
economy during the “Great Recession” of 2008-10. We will use data from the World
Bank World Development Indicators database.

1. Download the following data for your country for the years 2000-12: (1) GDP
(constant LCU), Consumer Price Index, General Government Final Consumption
Expenditure (constant LCU), Gross Fixed Capital Formation (constant LCU),
Household Final Consumption Expenditure (constant LCU), and Money and
Quasi Money (M2) (current LCU). These will be our series for real GDP, the
price level, government spending, investment, consumption, and money supply.

2. Compute the percentage change in each of these series for each year over the
period 2000-2007. The percentage change in the CPI is the rate of inflation. What
is the annual change in each series over this period? Do the same calculations for
2010-12 and report the average annual changes.

3. Now, do the same for the period 2007-10. Did the economy enter a recession?
What makes you think so? Which component of GDP fell the most during this
period (or grew more slowly than in the prior period): C, I, or G?

4. Do you think the recession was caused by a fall in Aggregate Demand? Why or
why not? Let us assume this is the case. What does our AD-AS model predict
should happen to real GDP and inflation? Is this what occurred?

5. Did government spending increase over the 2007-10 period? If so, why do you
think the government increased its activity?

6. Did the money supply increase over this period? If so, why do you think the
central bank expanded the money supply?

7. How has the economy, i.e., real GDP, performed since 2010? Is it growing faster
than during 2000-07? That is, is it returning to its trend, or is it still below?