Reference no: EM133081841

Is real potential GDP (YPOT) stable in the United States?

NOTE: Real potential GDP data after 2021 are forecasted 

1. Use the real potential GDP variable from the data table above to construct a graph from 1950:Q1 to 2031:Q4 using LINE 1 and LINE
2. Construct the growth rate ("percent change from a year ago") of real potential GDP.  by the Congressional Budget Office (CBO), which constructs these data.

[INSERT FIGURE 7 HERE]

QUESTIONS:  Between 1950 and 2021, what was the approximate minimum and maximum growth rate of potential real GDP?  The Quantity Theory of Money requires real GDP (Y), or at least its growth rate, to be constant in the long run.  Does the variation in the growth rate of real potential GDP seem stable enough for money and prices, or money growth and inflation, to be closely correlated in the long run?  Why or why not (use economic reasoning)?  What is the trend in the growth rate of real potential GDP in the very long run (1950-2021)? How is this trend related to growth in the US standard of living during this time?  What do the CBO's forecasts of growth in real potential GDP suggest is likely for growth in the US economy in the next decade (2021-2031)?  If you could change one thing about the US macroeconomy over the next decade to improve growth, what would it be and why?