After you have studied Economics in the News on pp. 546–547, answer the following questions.

a. How did the BEA estimates of the real GDP growth rate in the second and third quarters of 2020 change from the advanced estimate to the third estimate?

b. How did the NY Fed nowcast of the second quarter growth rate change through the quarter?

c. How did the NY Fed nowcast of the third quarter growth rate change through the quarter?

d. Describe the common feature of the relationship between the BEA and the NY Fed estimates of real GDP present since 2002 and visible in the second and third quarters of 2020.

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On July 30, 2020, the Bureau of Economic Analysis (BEA) published its advanced estimate of the real GDP growth rate in the second quarter (April 1 to June 30), a decrease of 32.9 percent expressed as an annual rate. This fall in real GDP was and remains the largest ever recorded. Was the fall foreseen? And what was going to happen in the third quarter of 2020? To answer questions like these and to provide the most accurate possible picture of the current state of the economy, economists at the Federal Reserve Bank of New York (the NY Fed) "nowcast" real GDP. A real GDP nowcast is an estimate of real GDP in the current quarter as it happens and before all the data have been gathered and used by the BEA to calculate the official measure of real GDP. To make a nowcast, economists feed real-time data into a statistical model to produce frequently updated nowcasts Real GDP (percentage change, annual rate) 40 30 20 9 O -10 -20 -30 NY Fed Q2 nowcasts NY Fed Q3 nowcasts BEA Q2 estimates BEA Q3 estimates -40 Mar 2020 Apr 2020 Jun 2020 Aug 2020 Oct 2020 Dec 2020 Month/year Figure 1 Nowcast and Actual Real GDP through Covid-19 Recession