Money, Banking and Financial Markets Problem Set #2 Due: September 7, 2011 1. The business cycle can be defined as the movement of real GDP over time. Possible sources of data: Define the term " recession" A decline in overall economic activity; decline in GDP for two or more consecutive quarters. If a recession continues long enough it is classified as depression. 2. a) Define the term SAAR (Seasonally Adjusted Annual Rate): A rate adjustment used for economic or business data that attempts to remove the seasonal variations. Adjusting for the seasonality in data means more accurate relative comparisons can be drawn from month to month all year. b) If January, 2011 housing starts were 40.1 thousand units, what would the SAAR be if the seasonal factor were .917? 43.72955 3. Find the current level, maximum and minimum values from 1967 to the present for: a) Real GDP growth rate (%) at SAAR (Use quarterly data) b) Unemployment rate (Use monthly data) c) Housing starts SAAR (Use annual data for max & min; use monthly
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