Tasks
For all the tasks below only use quarterly or yearly data for at least 30 years.
1. (2 marks) Plot the real GDP for the country over time and add an exponential trend
line with its equation, which reflects the potential GDP. Analyze briefly your graph
highlighting periods of recession and expansions, as well as finding the long run
economic growth rate.
2. (2 marks) Use real (or constant prices) household Consumption (C), private
investment (I) and your data on real GDP (Y). Plot on the same diagram the following
relationships:
C = a + b*Y
I = m + n*Y
where (a, b, m, n) are constants to be estimated.
HINTS:
The frequency of the data for C, I, and Y must be the same (e.g., quarterly or
yearly), and that you need to use constant prices of the same year for both
variables (e.g., Consumption and GDP, at constant prices of 2005, or
100=2005, or any other year available).
b is the marginal propensity to consume (MPC)
3. (1 mark) Assume anything else is constant, find the multiplier (K) for the chosen
economy.
