Questions: The green line on the following graph shows the economy's long-term growth trend. Use the blue points (circle symbol) to plot the real GDP in each of the years listed. (Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.) Next, place the black point (plus symbol) on the graph to indicate the point on the real GDP curve that definitely represents a peak. Finally, place the grey point (star symbol) on the graph to indicate the point on the real GDP curve that definitely represents a trough. Calculate the percentage change in real GDP in each of the years shown. (Hint: The percentage change in real GDP equals the change in GDP from the previous year to the current year. For example, you can calculate the percentage change for 1981 by finding the change in GDP from 1980 to 1981, dividing this change by the level of GDP in 1980, and then multiplying the result by 100%.)

The green line on the following graph shows the economy's long-term growth trend.

Use the blue points (circle symbol) to plot the real GDP in each of the years listed. (Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.) Next, place the black point (plus symbol) on the graph to indicate the point on the real GDP curve that definitely represents a peak. Finally, place the grey point (star symbol) on the graph to indicate the point on the real GDP curve that definitely represents a trough.

Calculate the percentage change in real GDP in each of the years shown. (Hint: The percentage change in real GDP equals the change in GDP from the previous year to the current year. For example, you can calculate the percentage change for 1981 by finding the change in GDP from 1980 to 1981, dividing this change by the level of GDP in 1980, and then multiplying the result by 100%.)

Transcript text: The green line on the following graph shows the economy's long-term growth trend. Use the blue points (circle symbol) to plot the real GDP in each of the years listed. (Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.) Next, place the black point (plus symbol) on the graph to indicate the point on the real GDP curve that definitely represents a peak. Finally, place the grey point (star symbol) on the graph to indicate the point on the real GDP curve that definitely represents a trough. Calculate the percentage change in real GDP in each of the years shown. (Hint: The percentage change in real GDP equals the change in GDP from the previous year to the current year. For example, you can calculate the percentage change for 1981 by finding the change in GDP from 1980 to 1981, dividing this change by the level of GDP in 1980, and then multiplying the result by $100 \%$.)

Solution

Solution Steps

Step 1: Identify the Real GDP Values for Each Year

Extract the real GDP values from the graph for each year listed (1980, 1981, 1982, 1983, 1984, 1985, 1986, 1987, 1988).

Step 2: Calculate the Percentage Change in Real GDP for Each Year

Use the formula for percentage change: \[ \text{Percentage Change} = \left( \frac{\text{GDP}_{\text{current year}} - \text{GDP}_{\text{previous year}}}{\text{GDP}_{\text{previous year}}} \right) \times 100 \]
Apply this formula to calculate the percentage change in real GDP from one year to the next.

Step 3: Plot the Real GDP Points on the Graph

Use the blue points (circle symbol) to plot the real GDP values for each year on the graph.

Final Answer

Identify the Real GDP Values for Each Year:
- 1980: 190 billion dollars
- 1981: 195 billion dollars
- 1982: 192 billion dollars
- 1983: 198 billion dollars
- 1984: 205 billion dollars
- 1985: 210 billion dollars
- 1986: 208 billion dollars
- 1987: 215 billion dollars
- 1988: 220 billion dollars
Calculate the Percentage Change in Real GDP for Each Year:
- 1981: $\left( \frac{195 - 190}{190} \right) \times 100 = 2.63\%$
- 1982: $\left( \frac{192 - 195}{195} \right) \times 100 = -1.54\%$
- 1983: $\left( \frac{198 - 192}{192} \right) \times 100 = 3.13\%$
- 1984: $\left( \frac{205 - 198}{198} \right) \times 100 = 3.54\%$
- 1985: $\left( \frac{210 - 205}{205} \right) \times 100 = 2.44\%$
- 1986: $\left( \frac{208 - 210}{210} \right) \times 100 = -0.95\%$
- 1987: $\left( \frac{215 - 208}{208} \right) \times 100 = 3.37\%$
- 1988: $\left( \frac{220 - 215}{215} \right) \times 100 = 2.33\%$
Plot the Real GDP Points on the Graph:
- Plot the points (1980, 190), (1981, 195), (1982, 192), (1983, 198), (1984, 205), (1985, 210), (1986, 208), (1987, 215), (1988, 220) on the graph using the blue circle symbols.