Problem 1: Consider the macroeconomic data provided below. Describe the state of the macroeconomy in terms of the business cycle for the period from 2003 to 2005. Note that GDP is stated in nominal terms, not in real terms.

Year       GDP       GDP       UNEMP    INFLATION

(trillions)    growth      rate        rate

Rate                    (change in CPI-U)

2002       $10.47      -           5.7%       1.60%

2003       $10.97      ?          6.0%       2.28%

2004       $11.73      ?          5.5%       2.66%

2005       $12.49      ?          5.1%       3.38%

Problem 2: Comment on the current unemployment situation in the U.S. What does the unemployment figure tell us about where the U.S. economy is in the business cycle? Explain. What does the movement in the unemployment rate from the previous monthly figure tell us about where the economy is going in the business cycle? Explain. Are deeper and more meaningful measures of labor market conditions necessary in order to comment more effectively on macroeconomic performance?

Problem 3: The oldest formal statistical metric of macroeconomic performance is GNP, Gross National Product, which was first measured and published for the year 1933. We now prefer GDP, Gross Domestic Product. Citation of figures for GDP, GDP per capita, and GDP growth rates are now a matter of routine in the culture of journalistic reporting on society. Discuss the use of such national income accounting metrics as GDP as measures of social well-being. Is GDP a useful and accurate guide to the attempt to quantify the welfare of society in the aggregate? Explain. Is the question, "Would you rather live in a country with a high GDP growth rate or a low GDP growth rate?" merely rhetorical?