1.10. Let' urn up some basic facts ofU.S. economic hi tory with numbers:

a. Fir t, let's measure the size of the Great Depression:

Real GDP in 1929

(peak): $323 billion Price level in 1929: 33 Real GDP in 1933

(trough): $206 billion Price level in 1933: 24 Calculate the percent change in real GDP and the percent change in the price level from 1929 to 1933. First, calculate the total change, and then divide it by the number of years to get the more typical measure of "percent per year." (Note: This is four full years, not three or five.)

b. Second, let's measure how much the econ omy grew from the lowest depths of the Depression to the peak of World War II's economic boom:

Real GDP in 1933

(trough): $206 billion Price level in 1933: 24 Real GDP in 1945: $596 billion Price level in 1945: 38 Again, first calculate the total change, and then divide it by the number of years to get the more typical measure of "percent per year. "

c. Finally, let's see if a growing economy must mean growing prices:

Real GDP in 1870:

$36 billion Price level in 1870: 22 Real GDP in 1900: $124 billion Price level in 1900: 16 Calculate the total and annual growth rates as before. Note: The price level fell fairly moothly across these three decades, a time when the economy grew rapidly and many great American novels were written about life in the growing cities.

(Source: Gordon, Robert J., ed. 1986. The American Business Cycle: Continuity and Change. Cambridge, MA: National Bureau of Economic Research.)