Given the following data.

2009 = 100

CurrentConstant

Year/qdollardollar

GDPGDP

1973Q1

1,380.7

5,380.5

1973Q2

1,417.6

5,441.5

1973Q3

1,436.8

5,411.9

1973Q4

1,479.1

5,462.4

1974Q1

1,494.7

5,417.0

1974Q2

1,534.2

5,431.3

1974Q3

1,563.4

5,378.7

1974Q4

1,603.0

5,357.2

1975Q1

1,619.6

5,292.4

1975Q2

1,656.4

5,333.2

1975Q3

1,713.8

5,421.4

1975Q4

1,765.9

5,494.4

SHOW YOUR CALCULATIONS

• Present the basic definition of a recession (used by the BEA). Does the data show a recession according to this definition? If so, when?

A recession is defined as two consecutive quarters of a negative GDP growth. The constant dollar GDP shows a decrease from 1974Q2 through 1975Q1 which is indicative of a recession.

• What was the average quarterly rate of real growth from 1973Q1 to 1975Q4? Show your calculations and assume that n = 11.

• What was the average quarterly rate of inflation 1973Q1 - 1975Q4? Show your calculations and assume that n = 11.

• What is the equation for the Trend Real GDP?