Data for the Classroom from
Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ US GDP: Employment Gap Closing Faster than Output Gap Posted Feb. 29, 2012 Terms of Use: These slides are made available under Creative Commons License Attribution—Share Alike 3.0 . You are free to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like the slides, you may also want to take a look at my textbook, Introduction to Economics , from BVT Publishers.

Q4 GDP Growth Revised Upward
<ul><li>US GDP growth accelerated to 3% in Q4 2011, the fastest rate in a year and a half, according to the advance estimate released today </li></ul><ul><li>It was the 10 th consecutive quarter of growth, good news for the White House as the election season heats up </li></ul><ul><li>Caution: This second estimate of Q4 growth is revised upward from the 2.8% advance estimate reported in January, but is subject to further revision </li></ul>Posted Feb. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

Economy Finally Moves Solidly Into
Expansion <ul><li>According to standard business cycle terminology, the recession phase of the business cycle is the downward movement of GDP from its previous peak </li></ul><ul><li>The recovery phase is the upward movement from the trough (low point) of the recession and continues until GDP again reaches its previous peak. </li></ul><ul><li>Once GDP moves above its previous peak, the expansion phase begins. </li></ul><ul><li>Q3 GDP was only slightly (0.04%) above its pre-recession peak. Now, in Q4, the economy has moved solidly into expansion </li></ul>Posted Feb. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

Sources of US GDP Growth
in Q3 2011 <ul><li>Consumption contributed strongly to Q4 growth, led by strong motor vehicle sales </li></ul><ul><li>Investment accounted for most of the gain in Q4 growth, as private inventory investment rebounded from negative growth in Q3 </li></ul><ul><li>Federal government spending fell sharply, led by defense cuts; state and local government spending also fell </li></ul><ul><li>Exports continued their strong growth but imports (a negative entry in the accounts) grew slightly faster, so net exports were a small drag on growth in Q4 </li></ul><ul><li>All major sectors were revised upward </li></ul>Posted Feb. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com Table shows the contribution of each sector to the 3% total GDP growth in Q4, 2011

Nominal GDP A Little Above
Trend, Gap Remains Large <ul><li>The estimate of nominal GDP (NGDP) growth was 3.9% in Q4 (quarterly growth stated as annual rate) </li></ul><ul><li>NGDP growth consisted of 3.0% real growth and 0.9% inflation </li></ul><ul><li>An increasing number of economists focus on NGDP growth as a key policy target. Real potential GDP growth has averaged about 2.3 percent over the past 10 years. Adding 2 percent for the Fed’s target rate of inflation gives 4.3 percent. NGDP targeters could thus make a case for a more stimulative policy </li></ul>Posted Feb. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com

Comparing the Output Gap and
the Employment Gap <ul><li>The output gap is the difference between actual and potential real GDP. </li></ul><ul><li>The employment gap is the difference between current unemployment and the natural rate </li></ul><ul><li>This chart shows that both gaps closed somewhat in Q4 2011, but the employment gap has closed more rapidly over the past year </li></ul>Posted Feb. 29, 2012 on Ed Dolan’s Econ Blog http://dolanecon.blogspot.com