Answer all parts of this question. You can answer those questions just with words. You may...

  

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Answer all parts of this question. You can answer those questions just with words. You may add equations or figures if you find them helpful but it is not necessary. We can decompose the non-farm output in the U.S. into trend and cyclical compo- nents, as discussed in Lecture 1. (a) [10 marks] What are the properties of the trend? List at least two properties and offer economic interpretations. (b) [10 marks] Which models we learned in the lectures can capture the properties of the trend you listed above? Pick one model and explain how it captures the properties. [10 marks] What are the properties of the cyclical components? List at least two properties. (d) [10 marks] What is the main difference in the cyclical components before and after mid 1980? Why? Answer all parts of this question. You can answer those questions just with words. You may add equations or figures if you find them helpful but it is not necessary. We can decompose the non-farm output in the U.S. into trend and cyclical compo- nents, as discussed in Lecture 1. (a) [10 marks] What are the properties of the trend? List at least two properties and offer economic interpretations. (b) [10 marks] Which models we learned in the lectures can capture the properties of the trend you listed above? Pick one model and explain how it captures the properties. [10 marks] What are the properties of the cyclical components? List at least two properties. (d) [10 marks] What is the main difference in the cyclical components before and after mid 1980? Why?

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