Note: For data to use in these exercises, go to the Federal Reserve Bank of St. Louis FRED database at research.stlouisfed.org/fred2

1. Calculate the total percentage growth in average labor productivity in the U.S. economy for the 1950s, 1960s, 1970s, 1980s, 1990s, and 2000s. Define average labor productivity for any year as real gross domestic product in the last quarter of the year divided by civilian employment in the last month of the year. In which decades did average labor productivity grow the most quickly overall? The most slowly? Express the growth rates for each decade in annualized terms by using the formula

(1 + g)^10 = 1 + G

where g is the annual growth rate, expressed as a decimal (for example, 0.05 for 5%), and G is the growth rate for the decade (the change in productivity during the decade divided by the initial productivity level). For each of the six decades, use your calculated values for G and the formula above to solve for g.

2. Calculate annual labor productivity growth rates for each year since 2010 for which data are available. How do the recent growth rates compare with those of the six previous decades?

3. Using data on the consumer price index (CPI) for all urban consumers, calculate and graph the annual U.S. inflation rate (the percentage change in the price index from one year ago) for each year since 1948. In which periods within the postwar era did the United States experience the most severe inflation problems? In which periods has inflation been the most stable (that is, roughly constant from one year to the next)?

4. Calculate and graph the growth rate of total factor productivity since 1960 using FRED series RTFPNAUSA632NRUG. (Note that this series is not the same as used in Table 3.1, but is similar.). How would you characterize the movements in productivity since 1960? How do recessions affect the growth rate of productivity? How was productivity affected by the oil shocks of 1973-1975, 1979-1980, 1990, and 2003-2008?