{"id":395,"date":"2015-05-04T22:01:09","date_gmt":"2015-05-04T22:01:09","guid":{"rendered":"https:\/\/courses.candelalearning.com\/masterymacro1xngcxmaster\/?post_type=chapter&p=395"},"modified":"2015-11-30T05:47:25","modified_gmt":"2015-11-30T05:47:25","slug":"tracking-real-gdp-over-time","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-hccc-macroeconomics\/chapter\/tracking-real-gdp-over-time\/","title":{"raw":"Reading: Tracking Real GDP Over Time","rendered":"Reading: Tracking Real GDP Over Time"},"content":{"raw":"

Tracking Real GDP Over Time<\/h2>\r\nWhen news reports indicate that \u201cthe economy grew 1.2% in the first quarter,\u201d the reports are referring to the percentage change in real GDP. By convention, GDP growth is reported at an annualized rate: Whatever the calculated growth in real GDP was for the quarter, it is multiplied by four when it is reported as if the economy were growing at that rate for a full year.\r\n\r\n[caption id=\"\" align=\"aligncenter\" width=\"451\"]\"The Figure\u00a05.10.<\/strong>\u00a0U.S. GDP, 1900\u20132012 Real GDP in the United States in 2012 was about $13 trillion. After adjusting to remove the effects of inflation, this represents a roughly 20-fold increase in the economy\u2019s production of goods and services since the start of the twentieth century. (Source: bea.gov).[\/caption]\r\n\r\n \r\n\r\nReal GDP is important because it is highly correlated with other measures of economic activity, like employment and unemployment. When real GDP rises, so does employment.\r\n\r\nThe most significant human problem associated with recessions (and their larger, uglier cousins, depressions) is that a slowdown in production means that firms need to lay off or fire some of the workers they have. Losing a job imposes painful financial and personal costs on workers, and often on their extended families as well. In addition, even those who keep their jobs are likely to find that wage raises are scanty at best\u2014they may even be asked to take pay cuts or work reduced\u00a0hours.\r\n\r\nTable\u00a05.7 lists the pattern of recessions and expansions in the U.S. economy since 1900. The highest point of the economy, before the recession begins, is called the peak<\/em>; conversely, the lowest point of a recession, before a recovery begins, is called the trough<\/em>. Thus, a recession lasts from peak to trough, and an economic upswing runs from trough to peak. The movement of the economy from peak to trough and trough to peak is called the business cycle<\/em>. It is intriguing to notice that the three longest trough-to-peak expansions of the twentieth century have happened since 1960. The most recent recession started in December 2007 and ended formally in June 2009. This was the most severe recession since the Great Depression of the 1930s.\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
Table 5.7. U.S. Business Cycles since 1900<\/th>\r\n<\/tr>\r\n<\/thead>\r\n
Trough<\/th>\r\nPeak<\/th>\r\nMonths of Contraction<\/th>\r\nMonths of Expansion<\/th>\r\n<\/tr>\r\n
\u00a0December 1900<\/td>\r\n\u00a0September 1902<\/td>\r\n\u00a018<\/td>\r\n\u00a021<\/td>\r\n<\/tr>\r\n
\u00a0August 1904<\/td>\r\n\u00a0May 1907<\/td>\r\n\u00a023<\/td>\r\n\u00a033<\/td>\r\n<\/tr>\r\n
\u00a0June 1908<\/td>\r\n\u00a0January 1910<\/td>\r\n\u00a013<\/td>\r\n\u00a019<\/td>\r\n<\/tr>\r\n
\u00a0January 1912<\/td>\r\n\u00a0January 1913<\/td>\r\n\u00a024<\/td>\r\n\u00a012<\/td>\r\n<\/tr>\r\n
\u00a0December 1914<\/td>\r\n\u00a0August 1918<\/td>\r\n\u00a023<\/td>\r\n\u00a044<\/td>\r\n<\/tr>\r\n
\u00a0March 1919<\/td>\r\n\u00a0January 1920<\/td>\r\n\u00a07<\/td>\r\n\u00a010<\/td>\r\n<\/tr>\r\n
\u00a0July 1921<\/td>\r\n\u00a0May 1923<\/td>\r\n\u00a018<\/td>\r\n\u00a022<\/td>\r\n<\/tr>\r\n
\u00a0July 1924<\/td>\r\n\u00a0October 1926<\/td>\r\n\u00a014<\/td>\r\n\u00a027<\/td>\r\n<\/tr>\r\n
\u00a0November 1927<\/td>\r\n\u00a0August 1929<\/td>\r\n\u00a023<\/td>\r\n\u00a021<\/td>\r\n<\/tr>\r\n
\u00a0March 1933<\/td>\r\n\u00a0May 1937<\/td>\r\n\u00a043<\/td>\r\n\u00a050<\/td>\r\n<\/tr>\r\n
\u00a0June 1938<\/td>\r\n\u00a0February 1945<\/td>\r\n\u00a013<\/td>\r\n\u00a080<\/td>\r\n<\/tr>\r\n
\u00a0October 1945<\/td>\r\n\u00a0November 1948<\/td>\r\n\u00a08<\/td>\r\n\u00a037<\/td>\r\n<\/tr>\r\n
\u00a0October 1949<\/td>\r\n\u00a0July 1953<\/td>\r\n\u00a011<\/td>\r\n\u00a045<\/td>\r\n<\/tr>\r\n
\u00a0May 1954<\/td>\r\n\u00a0August 1957<\/td>\r\n\u00a010<\/td>\r\n\u00a039<\/td>\r\n<\/tr>\r\n
\u00a0April 1958<\/td>\r\n\u00a0April 1960<\/td>\r\n\u00a08<\/td>\r\n\u00a024<\/td>\r\n<\/tr>\r\n
\u00a0February 1961<\/td>\r\n\u00a0December 1969<\/td>\r\n\u00a010<\/td>\r\n\u00a0106<\/td>\r\n<\/tr>\r\n
\u00a0November 1970<\/td>\r\n\u00a0November 1973<\/td>\r\n\u00a011<\/td>\r\n\u00a036<\/td>\r\n<\/tr>\r\n
\u00a0March 1975<\/td>\r\n\u00a0January 1980<\/td>\r\n\u00a016<\/td>\r\n\u00a058<\/td>\r\n<\/tr>\r\n
\u00a0July 1980<\/td>\r\n\u00a0July 1981<\/td>\r\n\u00a06<\/td>\r\n\u00a012<\/td>\r\n<\/tr>\r\n
\u00a0November 1982<\/td>\r\n\u00a0July 1990<\/td>\r\n\u00a016<\/td>\r\n\u00a092<\/td>\r\n<\/tr>\r\n
\u00a0March 2001<\/td>\r\n\u00a0November 2001<\/td>\r\n\u00a08<\/td>\r\n\u00a0120<\/td>\r\n<\/tr>\r\n
\u00a0December 2007<\/td>\r\n\u00a0June 2009<\/td>\r\n\u00a018<\/td>\r\n\u00a073<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n
Source: http:\/\/www.nber.org\/cycles\/main.html<\/span><\/td>\r\n<\/tr>\r\n<\/tfoot>\r\n<\/table>\r\nA private think tank, the National Bureau of Economic Research<\/em>, is the official tracker of business cycles for the U.S. economy. However, the effects of a severe recession often linger on after the official ending date assigned by the NBER.","rendered":"

Tracking Real GDP Over Time<\/h2>\n

When news reports indicate that \u201cthe economy grew 1.2% in the first quarter,\u201d the reports are referring to the percentage change in real GDP. By convention, GDP growth is reported at an annualized rate: Whatever the calculated growth in real GDP was for the quarter, it is multiplied by four when it is reported as if the economy were growing at that rate for a full year.<\/p>\n

\"The<\/p>\n

Figure\u00a05.10.<\/strong>\u00a0U.S. GDP, 1900\u20132012 Real GDP in the United States in 2012 was about $13 trillion. After adjusting to remove the effects of inflation, this represents a roughly 20-fold increase in the economy\u2019s production of goods and services since the start of the twentieth century. (Source: bea.gov).<\/p>\n<\/div>\n

 <\/p>\n

Real GDP is important because it is highly correlated with other measures of economic activity, like employment and unemployment. When real GDP rises, so does employment.<\/p>\n

The most significant human problem associated with recessions (and their larger, uglier cousins, depressions) is that a slowdown in production means that firms need to lay off or fire some of the workers they have. Losing a job imposes painful financial and personal costs on workers, and often on their extended families as well. In addition, even those who keep their jobs are likely to find that wage raises are scanty at best\u2014they may even be asked to take pay cuts or work reduced\u00a0hours.<\/p>\n

Table\u00a05.7 lists the pattern of recessions and expansions in the U.S. economy since 1900. The highest point of the economy, before the recession begins, is called the peak<\/em>; conversely, the lowest point of a recession, before a recovery begins, is called the trough<\/em>. Thus, a recession lasts from peak to trough, and an economic upswing runs from trough to peak. The movement of the economy from peak to trough and trough to peak is called the business cycle<\/em>. It is intriguing to notice that the three longest trough-to-peak expansions of the twentieth century have happened since 1960. The most recent recession started in December 2007 and ended formally in June 2009. This was the most severe recession since the Great Depression of the 1930s.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Table 5.7. U.S. Business Cycles since 1900<\/th>\n<\/tr>\n<\/thead>\n
Trough<\/th>\nPeak<\/th>\nMonths of Contraction<\/th>\nMonths of Expansion<\/th>\n<\/tr>\n
\u00a0December 1900<\/td>\n\u00a0September 1902<\/td>\n\u00a018<\/td>\n\u00a021<\/td>\n<\/tr>\n
\u00a0August 1904<\/td>\n\u00a0May 1907<\/td>\n\u00a023<\/td>\n\u00a033<\/td>\n<\/tr>\n
\u00a0June 1908<\/td>\n\u00a0January 1910<\/td>\n\u00a013<\/td>\n\u00a019<\/td>\n<\/tr>\n
\u00a0January 1912<\/td>\n\u00a0January 1913<\/td>\n\u00a024<\/td>\n\u00a012<\/td>\n<\/tr>\n
\u00a0December 1914<\/td>\n\u00a0August 1918<\/td>\n\u00a023<\/td>\n\u00a044<\/td>\n<\/tr>\n
\u00a0March 1919<\/td>\n\u00a0January 1920<\/td>\n\u00a07<\/td>\n\u00a010<\/td>\n<\/tr>\n
\u00a0July 1921<\/td>\n\u00a0May 1923<\/td>\n\u00a018<\/td>\n\u00a022<\/td>\n<\/tr>\n
\u00a0July 1924<\/td>\n\u00a0October 1926<\/td>\n\u00a014<\/td>\n\u00a027<\/td>\n<\/tr>\n
\u00a0November 1927<\/td>\n\u00a0August 1929<\/td>\n\u00a023<\/td>\n\u00a021<\/td>\n<\/tr>\n
\u00a0March 1933<\/td>\n\u00a0May 1937<\/td>\n\u00a043<\/td>\n\u00a050<\/td>\n<\/tr>\n
\u00a0June 1938<\/td>\n\u00a0February 1945<\/td>\n\u00a013<\/td>\n\u00a080<\/td>\n<\/tr>\n
\u00a0October 1945<\/td>\n\u00a0November 1948<\/td>\n\u00a08<\/td>\n\u00a037<\/td>\n<\/tr>\n
\u00a0October 1949<\/td>\n\u00a0July 1953<\/td>\n\u00a011<\/td>\n\u00a045<\/td>\n<\/tr>\n
\u00a0May 1954<\/td>\n\u00a0August 1957<\/td>\n\u00a010<\/td>\n\u00a039<\/td>\n<\/tr>\n
\u00a0April 1958<\/td>\n\u00a0April 1960<\/td>\n\u00a08<\/td>\n\u00a024<\/td>\n<\/tr>\n
\u00a0February 1961<\/td>\n\u00a0December 1969<\/td>\n\u00a010<\/td>\n\u00a0106<\/td>\n<\/tr>\n
\u00a0November 1970<\/td>\n\u00a0November 1973<\/td>\n\u00a011<\/td>\n\u00a036<\/td>\n<\/tr>\n
\u00a0March 1975<\/td>\n\u00a0January 1980<\/td>\n\u00a016<\/td>\n\u00a058<\/td>\n<\/tr>\n
\u00a0July 1980<\/td>\n\u00a0July 1981<\/td>\n\u00a06<\/td>\n\u00a012<\/td>\n<\/tr>\n
\u00a0November 1982<\/td>\n\u00a0July 1990<\/td>\n\u00a016<\/td>\n\u00a092<\/td>\n<\/tr>\n
\u00a0March 2001<\/td>\n\u00a0November 2001<\/td>\n\u00a08<\/td>\n\u00a0120<\/td>\n<\/tr>\n
\u00a0December 2007<\/td>\n\u00a0June 2009<\/td>\n\u00a018<\/td>\n\u00a073<\/td>\n<\/tr>\n<\/tbody>\n
Source: http:\/\/www.nber.org\/cycles\/main.html<\/span><\/td>\n<\/tr>\n<\/tfoot>\n<\/table>\n

A private think tank, the National Bureau of Economic Research<\/em>, is the official tracker of business cycles for the U.S. economy. However, the effects of a severe recession often linger on after the official ending date assigned by the NBER.<\/p>\n\n\t\t\t

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Candela Citations<\/h3>\n\t\t\t\t\t
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