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_t = β₁ + β₂ X_t + u_t

Estimate this model for both current and constant-dollar GDP.

c. How would you interpret β₂?

d. If there is a difference between β₂ estimated for current-dollar GDP and that estimated for constant-dollar GDP, what explains the difference?

Table 3.8

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Year NGDP RGDP Year NGDP RGDP 2,441.3 2,501.8 2,560.0 2,715.2 2,834.0 2,998.6 3,191.1 3,399.1 3,484.6 3,652.7 3,765.4 3,771.9 3,898.6 4,105.0 4,341.5 4,319.6 4,311.2 4,540.9 4,750.5 5,015.0 5,173.4 5,161.7 5,291.7 5,189.3 1959 506.6 1983 3,536.7 3,933.2 4,220.3 4,462.8 4,739.5 5,103.8 5,484.4 5,803.1 5,995.9 6,337.7 6,657.4 7,072.2 7,397.7 7,816.9 8,304.3 8,747.0 9,268.4 9,817.0 10,128.0 10,469.6 10,960.8 11,712.5 12,455.8 5,423.8 5,813.6 6,053.7 6,263.6 6,475.1 6,742.7 6,981.4 7,112.5 7,100.5 7,336.6 7,532.7 7,835.5 8,031.7 8,328.9 8,703.5 9,066.9 9,470.3 9,817.0 9,890.7 10,048.8 10,301.0 10,703.5 11,048.6 1960 526.4 1984 1961 544.7 1985 1962 1986 585.6 1987 1963 617.7 1988 1964 663.6 1965 719.1 1989 1966 787.8 1990 1991 1967 832.6 1968 910.0 1992 1969 984.6 1993 1970 1,038.5 1,127.1 1,238.3 1,382.7 1,500.0 1,638.3 1,825.3 2,030.9 2,294.7 2,563.3 2,789.5 3,128.4 3,255.0 1994 1971 1995 1972 1996 1973 1997 1974 1998 1975 1999 1976 2000 1977 2001 1978 2002 1979 2003 1980 2004 1981 2005 1982