If there is a difference between beta2 estimated for


Table 3.8 gives data on gross domestic product (GDP) for the United States for the years 1959-1997.
a. Plot the GDP data in current and constant (i.e., 1992) dollars against time.
b. Letting Y denote GDP and X time (measured chronologically starting with 1 for 1959, 2 for 1960, through 39 for 1997), see if the following model ?ts the GDP data:

Yt = β1 + β2 Xt + ut

Estimate this model for both current and constant-dollar GDP.

c. How would you interpret β2 ?

d. If there is a difference between β2 estimated for current-dollar GDP and that estimated for constant-dollar GDP, what explains the difference?

TABLE 3.8     NOMINAL AND REAL GDP, UNITED STATES, 1959-1997

Year

NGDP

RGDP

Year

NGDP

RGDP

1959

507.2000

2210.200

1979

2557.500

4630.600

1960

526.6000

2262.900

1980

2784.200

4615.000

1961

544.8000

2314.300

1981

3115.900

4720.700

1962

585.2000

2454.800

1982

3242.100

4620.300

1963

617.4000

2559.400

1983

3514.500

4803.700

1964

663.0000

2708.400

1984

3902.400

5140.100

1965

719.1000

2881.100

1985

4180.700

5323.500

1966

787.7000

3069.200

1986

4422.200

5487.700

1967

833.6000

3147.200

1987

4692.300

5649.500

1968

910.6000

3293.900

1988

5049.600

5865.200

1969

982.2000

3393.600

1989

5438.700

6062.000

1970

1035.600

3397.600

1990

5743.800

6136.300

1971

1125.400

3510.000

1991

5916.700

6079.400

1972

1237.300

3702.300

1992

6244.400

6244.400

1973

1382.600

3916.300

1993

6558.100

6389.600

1974

1496.900

3891.200

1994

6947.000

6610.700

1975

1630.600

3873.900

1995

7269.600

6761.700

1976

1819.000

4082.900

1996

7661.600

6994.800

1977

2026.900

4273.600

1997

8110.900

7269.800

1978

2291.400

4503.000

 

 

 

 

Note: NGDP = nominal GDP (current dollars in billions).

RGDP = real GDP (1992 billions of dollars).

Source: Economic Report of the President, 1999, Tables B-1 and B-2, pp. 326-328.

e. From your results what can you say about the nature of in?ation in the United States over the sample period?

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Microeconomics: If there is a difference between beta2 estimated for
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