Answer to Question #199625 in Macroeconomics for Hamza

Question

Suppose that a country’s annual growth rates were 5, 3, 4, -1, -2, 2, 3, 4, 6, and 3 in yearly 

sequence over a 10-year period. What was the country’s trend rate of growth over this 

period? Which set of years most clearly demonstrates an expansionary phase of the 

business cycle? Which set of years best illustrates a recessionary phase of the business 

cycle? 

Answer 1

The country's trend rate of growth is the average growth over the entire 10 year period;

$(5+3+4-1-2+2+3+4+ 6+3)/10 =2.7$

The years that clearly demonstrates an expansionary phase of the business cycle

Year 6 to 9

During this period the rate of growth is positive and increasing.

The years that clearly demonstrates a recessionary phase of the business cycle

Year 4 and 5

During this years the growth rate is negative and declining.