Question

Based on the information in Table $8-3$, in what years was the economy in a recession? Explain briefly.

Short answer

The Great Recession occurred between 2007 and 2009, following the implosion of the US housing bubble and the global financial crisis.

Step-by-step solution

    Introduction

The Relationship Between Nominal and Real GDP:

Figure$8-4$shows the relationship between nominal and real GDP since$1970$. The difference between the two GDP statistics is fairly large, demonstrating the degree of inflation that has occurred. The choice of a base year is purely arbitrary. In this example, we've used$2009$ as the starting point. This is the GDP deflator's current base year, according to the government.

Real GDP per capita:

Using real GDP changes as a metric of economic growth might be misleading, especially if the population size has changed dramatically. If real GDP expanded by $100\%$during a ten-year period, you might assume that the real income of the average person in the economy climbed by the same amount.

    Correction GDP for Price Index Changes

Figure$8-3$

    Nominal and real GDP

Figure$8-4$