Wednesday, November 14, 2012

Macroeconomic Analysis, Midterm Clarification

A number of students have emailed me about question #1.  A large part of the confusion is that one variable label is missing (it has since been added):

( P ) = Price level GDP [%] 

This is not a CPI variable, it is a (kind of) GDP deflator.  Regardless, use this as your price level variable when answering question #1.

There is another point of confusion about the c, i and g variables.  Again, as the labels state, these are in percentage share of GDP (the variable RGDPL).  Use RGDPL when converting the shares into levels.  When you have the levels of c, g and i you can calculate the growth rates of each of these variables.

I have also had a couple of students confused over question 1d (the calculation of nominal growth rates).  This is something we have done before and I cannot walk you through it.  Hopefully, with the clarifications above it will be more obvious how to answer this question.

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