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Renyuan Cui
ECON 202
Instructor: Scammell
Macro-Analysis
Question 1
At the end of five year period the various metrics presented over this time helps discern level of
business cycle for this economy. To start with, real GDP is declining especially after the third
year which witnessed a period of growth compared to the first two years. Evidently, real GDP
between 3rd and 4 year declines from 4,917 to 4890 and further plummets 4880 during the fifth
year. Illustrating the economy was undergoing economic slow-down due to reduced national
output characterized by declining real GDP. Additionally, level of unemployment increases
between the last 3 years starting from an all low yet favorable at 4.9 with the following year
increasing to 5.6 and reaches the highest level of unemployment within the five year period at
8.5. Therefore, using this metrics of economic growth in relation to business cycles it is easy to
conclude by the end the fifth year the economy is undergoing contraction as shown below
(Mankiw, 2014).
Illustration of business cycles (contraction in red)
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More so, the evident reduced Real GDP is worsened by high inflation rates a rise from 4.3 in 2nd
year to 9.4 in the 5th year which cause stagnation or reduction of aggregate demand in the
economy another characteristic of contraction business cycle.
Question 2
The calculation below shows the annual Real GDP growth rate comparing from second year
through year five.
Year 2-3: 4917 – 4648= $ 268 billion
Year 3-4: 4890 – 4917 = – $27 billion
Year 4-5: 4880 – 4890= – $10 billion
Above calculation illustrate a positive value for annual Real GDP only between 2nd and 3rd year
