Table 3.8 gives data on gross domestic product (GDP) for the United States for the years 1959-1997.
a. Plot the GDP data in current and constant (i.e., 1992) dollars against time.
b. Letting Y denote GDP and X time (measured chronologically starting with 1 for 1959, 2 for 1960, through 39 for 1997), see if the following model ?ts the GDP data:

Yt = β1 + β2 Xt + ut

Estimate this model for both current and constant-dollar GDP.

c. How would you interpret β2 ?

d. If there is a difference between β2 estimated for current-dollar GDP and that estimated for constant-dollar GDP, what explains the difference?

TABLE 3.8     NOMINAL AND REAL GDP, UNITED STATES, 1959-1997

Note: NGDP = nominal GDP (current dollars in billions).

RGDP = real GDP (1992 billions of dollars).

Source: Economic Report of the President, 1999, Tables B-1 and B-2, pp. 326-328.

e. From your results what can you say about the nature of in?ation in the United States over the sample period?