Table 3.8 gives data on gross domestic product (GDP) for the United States for the years...

  

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Table 3.8 gives data on gross domestic product (GDP) for the United States for the years 1959-2005. a. Plot the GDP data in current and constant (i.e., 2000) dollars against time. b. Letting Y denote GDP and X time (measured chronologically starting with 1 for 1959, 2 for 1960, through 47 for 2005), see if the following model fits the GDP data: Y, = B1 + B2 X1 +u; Estimate this model for both current and constant-dollar GDP. c. How would you interpret B2? d. If there is a difference between B2 estimated for current-dollar GDP and that estimated for constant-dollar GDP, what explains the difference? e. From your results what can you say about the nature of inflation in the United States over the sample period? TABLE 3.8 Nominal and Real Gross Domestic Product, 1959-2005 (billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates; RGDP in billions of chained [2000] dollars) Year NGDP RGDP Year NGDP RGDP 1959 506.6 2,441.3 1983 3,536.7 5,423.8 1960 526.4 2,501.8 1984 3,933.2 5,813.6 1961 544.7 2,560.0 1985 4,220.3 6,053.7 1962 585.6 2,715.2 1986 4,462.8 6,263.6 1963 617.7 2,834.0 1987 4,739.5 6,475.1 1964 663.6 2,998.6 1988 5,103.8 6,742.7 1965 719.1 3,191.1 1989 5,484.4 6,981.4 1966 787.8 3,399.1 1990 5,803.1 7,112.5 1967 832.6 3,484.6 1991 5,995.9 7,100.5 1968 910.0 3,652.7 1992 6,337.7 7,336.6 1969 984.6 3,765.4 1993 6,657.4 7,532.7 1970 1,038.5 3,771.9 1994 7,072.2 7,835.5 1971 1,127.1 3,898.6 1995 7,397.7 8,031.7 1972 1,238.3 4,105.0 1996 7,816.9 8,328.9 1973 1,382.7 4,341.5 1997 8,304.3 8,703.5 1974 1,500.0 4,319.6 1998 8,747.0 9,066.9 1975 1,638.3 4,311.2 1999 9,268.4 9,470.3 1976 1,825.3 4,540.9 2000 9,817.0 9,817.0 1977 2,030.9 4,750.5 2001 10,128.0 9,890.7 1978 2,294.7 5,015.0 2002 10,469.6 10,048.8 1979 2,563.3 5,173.4 2003 10,960.8 10,301.0 1980 2,789.5 5,161.7 2004 11,712.5 10,703.5 1981 3,128.4 5,291.7 2005 12,455.8 11,048.6 1982 3,255.0 5,189.3 Source: Economic Report of the President, 2007. Table B-1 and B-2. Table 3.8 gives data on gross domestic product (GDP) for the United States for the years 1959-2005. a. Plot the GDP data in current and constant (i.e., 2000) dollars against time. b. Letting Y denote GDP and X time (measured chronologically starting with 1 for 1959, 2 for 1960, through 47 for 2005), see if the following model fits the GDP data: Y, = B1 + B2 X1 +u; Estimate this model for both current and constant-dollar GDP. c. How would you interpret B2? d. If there is a difference between B2 estimated for current-dollar GDP and that estimated for constant-dollar GDP, what explains the difference? e. From your results what can you say about the nature of inflation in the United States over the sample period? TABLE 3.8 Nominal and Real Gross Domestic Product, 1959-2005 (billions of dollars, except as noted; quarterly data at seasonally adjusted annual rates; RGDP in billions of chained [2000] dollars) Year NGDP RGDP Year NGDP RGDP 1959 506.6 2,441.3 1983 3,536.7 5,423.8 1960 526.4 2,501.8 1984 3,933.2 5,813.6 1961 544.7 2,560.0 1985 4,220.3 6,053.7 1962 585.6 2,715.2 1986 4,462.8 6,263.6 1963 617.7 2,834.0 1987 4,739.5 6,475.1 1964 663.6 2,998.6 1988 5,103.8 6,742.7 1965 719.1 3,191.1 1989 5,484.4 6,981.4 1966 787.8 3,399.1 1990 5,803.1 7,112.5 1967 832.6 3,484.6 1991 5,995.9 7,100.5 1968 910.0 3,652.7 1992 6,337.7 7,336.6 1969 984.6 3,765.4 1993 6,657.4 7,532.7 1970 1,038.5 3,771.9 1994 7,072.2 7,835.5 1971 1,127.1 3,898.6 1995 7,397.7 8,031.7 1972 1,238.3 4,105.0 1996 7,816.9 8,328.9 1973 1,382.7 4,341.5 1997 8,304.3 8,703.5 1974 1,500.0 4,319.6 1998 8,747.0 9,066.9 1975 1,638.3 4,311.2 1999 9,268.4 9,470.3 1976 1,825.3 4,540.9 2000 9,817.0 9,817.0 1977 2,030.9 4,750.5 2001 10,128.0 9,890.7 1978 2,294.7 5,015.0 2002 10,469.6 10,048.8 1979 2,563.3 5,173.4 2003 10,960.8 10,301.0 1980 2,789.5 5,161.7 2004 11,712.5 10,703.5 1981 3,128.4 5,291.7 2005 12,455.8 11,048.6 1982 3,255.0 5,189.3 Source: Economic Report of the President, 2007. Table B-1 and B-2.