Question

Suppose that a country’s annual growth rates over a 10-year period are as follows: Year Growth Rate 1 5% 2 3 3 4 4 – 1 5 – 2 6 2 7 3 8 4 9 6 10 3 Instructions: In part a, round your answer to 1 decimal place. In part b, enter your answers as whole numbers. a. What was the country’s trend rate of growth over this period?

Answer 1

Answer:

a.  2.7%

b. From 6 to 9 years

Explanation:

a. The country’s trend rate of growth over this period is computed below:

= Total of growth rate ÷ time period

where,

Total of growth rate is

= 5% + 3% + 4% -1% -2% +2% + 3% + 4% + 6% + 3%

= 27%

And, the time period is 10 years

So, the trend growth rate is

= 27% ÷ 10 years

= 2.7%

b. The expansionary phase of the business cycle is from 6 years to 9 years as the growth rate is increased over this time period plus the growth rate is positive