Lecture 2 Example 1.1 -- Working with Growth Rates -- Solved

Lecture 2 Example 1.1 -- Working with Growth Rates --...

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Unformatted text preview: 1/5 ECO 320L INTERMEDIATE MACROECONOMICS Example 1.1: Working with Growth Rates 8/30/2010 Professor Beatrix Paal BRB 3.114 professorpaal@gmail.com (512) 475-8531 MAIN EXAMPLE SETUP t 1 2 3 4 X t 40 50 60 66 For concreteness, think of these data as monthly sales of books by a bookstore. (Number of books, for example.) DEFINITIONS Growth rates between t =1 and t =2: 1,2 g 50 40 10 0.25 25% 40 40 between t =2 and t =3: 2,3 g 60 50 10 0.2 20% 50 50 , or between t =1 and t =3: 1,3 g 60 40 20 0.5 50% 40 40 Interpretation: In February, the bookstore sold 25 % more books than in January. In March, the bookstore sold 50 % more books than in January. Growth factors between t =1 and t =2: 1,2 G 50 1.25 40 similarly, 2,3 G 1.2 , and 1,3 G 1.5 ECO 320L, Professor Beatrix Paal Working with Growth Rates 2/5 Interpretation: In February, the bookstore sold 1.25 times as many books as in January. In March, the bookstore sold 1.5 times as many books as in January. GROWTH RATES AND GROWTH FACTORS OVER TIME Interpretation: Suppose we know that sales increased from January to February by 25% and from February to March by another 20%. We want to know by what percent sales increased from January to March. increased from January to March....
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Lecture 2 Example 1.1 -- Working with Growth Rates --...

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