Macroeconomics

Real GDP Growth in the United States

Growth in real GDP averages about 3 per-

cent per year, but there are substantial fluctuations around this average. The shaded

areas represent periods of recession.

Source: U.S. Department of Commerce.

F I G U R E

9 - 1

Percentage

change from

4 quarters

earlier

10

8

6

4

2

0

2

4

1970

Year

1975

1980

1985

1990

1995

2000

2005

Average growth rate

Real GDP growth rate

1

Note that Figure 9-1 plots growth in real GDP from four quarters earlier, rather than from the

immediately preceding quarter. During the 2001 recession, this measure declined but never

turned negative.

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Unemployment and Okun’s Law

The business cycle is apparent not only in data from the national income

accounts but also in data that describe conditions in the labor market. Figure

9-3 shows the unemployment rate from 1970 to early 2009, again with the

shaded areas representing periods of recession. You can see that unemployment 

rises in each recession. Other labor-market measures tell a similar story. For

example, job vacancies, as measured by the number of help-wanted ads in

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P A R T   I V

Business Cycle Theory: The Economy in the Short Run