Understanding macroeconomic data

Macroeconomics is the study of the performance of national economies and the policies governments use to try to improve that performance. Economists make extensive use of data to describe and analyze the health of the economy. Some of the most important variables that economists focus on are: output (and output per person), labor productivity, the unemployment rate, the inflation rate, and the trade balance (exports and imports). The exercises below will help familiarize you with the data that economists study and assist you in describing the historical behavior of the economy by noticing patterns in macroeconomic data. During the remainder of the course you will spend most of your time developing explanations for these patterns using economic theory.

Exploration: What is the behavior of macroeconomic data over time?

The applet above allows you to graph a variety of economic data over different periods of time. Simply click on the check-boxes or variable name of the data that you want to graph (up to two variables at a time), enter the starting and ending dates, and click on the "Plot Data" button to graph. The line color on the graph matches the color of the variable name. Click on "Show Recessions" to show periods of recession (shaded). Click the Reset button to clear the graph and start over.

1. Graph Output and Output per Person over the period 1900-2002. What features do you notice about each of these two variables? Describe the general behavior of U.S. output over time.
   
   
2. Reset the graph. Graph Labor Productivity (Output per worker) over the period 1900-2002. Describe the behavior of labor productivity over time. Over what periods of time does it appear labor productivity rose the fastest? The slowest?
   
   
3. Reset the graph. Graph the Unemployment Rate over the period 1900-2002. How does the behavior of the unemployment rate differ from the behavior of output or productivity? Describe the behavior of the unemployment rate over time. During what periods was the unemployment rate the highest? The lowest? What has been happening to the unemployment rate in recent years?
   
   
4. Reset the graph. Graph the Inflation Rate over the period 1900-2002. Describe the behavior of the inflation rate over time. During what periods was the inflation rate the highest? The lowest? What does it mean to have a "negative" inflation rate? What has been happening to the inflation rate in recent years?
   
   
5. Reset the graph. Graph Exports and Imports over the period 1900-2002. What has been happening to the share of imports and exports in the economy since the 1950s? What does this imply about the level of interdependence of national economies in the world economy?
   
   
6. Reset the graph. Graph the Trade Balance (Exports – Imports) over the period 1900-2002. Describe the behavior of the U.S. trade balance during this time.
   
   
7. Reset the graph. Graph Output (Real GDP) and the Unemployment Rate together over the period 1928-1940. What do you notice about the relationship between the unemployment rate and the level of output during this period? Reset the graph. Next, graph these two variables over the period 1971-1979. Do you observe the same relationship during this period? Why do you suppose the two are related?
   
   
8. Reset the graph. Graph the Unemployment Rate and the Inflation Rate together over the period 1964-1968. What do you notice about the relationship between the unemployment rate and the inflation rate during this period? Reset the graph. Next, graph these two variables over the period 1973-1977. Do you observe the same relationship over this period? Based on your analysis, can you make any generalizations about the relationship between these two economic variables? What was the relationship between the unemployment rate and the inflation rate in the 1990s?
   
   
9. Reset the graph. Graph Labor Productivity and Output (Real GDP) together over the period 1900-2002. What accounts for the differences in the appearance of these two variables?
   
   
10. Reset the graph. Show economic expansions and recessions on the graph by using the Show Recessionsbutton. What do you notice about the length of economic expansions (gray) relative to economic recessions (blue)? How many recessions have occurred since you have been born?
    
    
11. Reset the graph. Show economic expansions and recessions on the graph by using the Show Recessions button. Graph Output over the period 1960-2002. What happens to output during recessions?
    
    
12. Reset the graph. Show economic expansions and recessions on the graph by using the Show Recessions button. Graph the Unemployment Rate over the period 1960-2002. What happens to output during recessions?
    
    
13. Reset the graph. Show economic expansions and recessions on the graph by using the Show Recessions button. Graph the Inflation Rate over the period 1960-2002. What happens to output during recessions?

View Answers

Exercise picked up from the 2e Macroeconomics textbook.