1. Chapter 1
What This Book is About

2. Real GDP per Person, 1980–1987 25 1900 Trend in real GDP per person
1920
1940
1960
1980 20 15
Thousands of 1987 dollars
(logarithmic scale) 10 5
Figure 1.1
©1999 South-Western College Publishing

3. Prices in the United States Since 1890
140
120
100
WWI
WWII 80 60
Percentage of 1987 price
(logarithmic scale) 40 20
Time
1900
1920
1940
1960
1980
Pre-WWII trend Post-WWII trend Price as a percentage of the average price of commodities
Figure 1.2
©1999 South-Western College Publishing

4. Percentage of U.S. GDP per person
©1999 South-Western College Publishing
GDP per Person as a Percentage of U.S. GDP per Person in Four Selected Countries
100 80 80 70 60 50
Percentage of U.S. GDP per person 40 30 20 10
1960
’63
’66
’69
’72
’75
’78
’81
’84
’87
’90
India United Kingdom
Japan South Korea
Figure 1.3

5. Percent deviation from trend
Percentage deviation of real GDP per person from trend (right scale)
Real GDP per person (left scale) 5 10 15 20
Thousands of 1987 dollars
(logarithmic scale)
Percent deviation from trend 20 40
-20
-40
Time
1940
1920
1900
1960
1980
Figure 1.4
©1999 South-Western College Publishing

6. Procyclical Variables
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Procyclical Variables
-40
-20 20 40
Panel A
Percentage deviation from trend
1900
1920
1940
1960
1980
Time
GDP Consumption
Figure 1.5A

7. Countercyclical Variables Percentage deviation from trend
©1999 South-Western College Publishing
Countercyclical Variables
-40
-20 20 40
Panel B
Percentage deviation from trend
1900
1920
1940
1960
1980
Time
GDP Unemployment
Figure 1.5B

8. Why the Business Cycle Matters Time-5
-10 5 10
In 1988 it took 12 weeks to find a job. The average wage was $12.02 an hour.
Percentage difference of real GDP per capita from trend
In 1983 it took 20 weeks to find a job. The average wage was $11.40 an hour
1972
’74
’76
’80
’82
’84
’86
’88
’92
’78
’90
Time
Figure 1.6
©1999 South-Western College Publishing

9. Percentage of 1987 price (logarithmic scale)
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Inflation and the Price Level Since 1890 20 10
0.0
120
100
-10
Inflation (left scale)
Percentage per Year
Percentage of 1987 price (logarithmic scale) 80
-20 60 40
-30 20
GDP deflator (right scale)
Figure 1.7
1900
1920
1940
1960
1980

10. Inflation and Unemployment 10
©1999 South-Western College Publishing 10 8 6
Percentage points 4 2
The Carter Presidency
1950
’55
’60
’65
’70
’75
’80
’85
’90
Inflation (percent per year)
Percentage of the labor force unemployed
Figure 1.8

11. Thousands of 1987 dollars (logarithmic scale)5 10 15 20 25
Which of these graphs is actual GDP per person and which is simulated by the model?
Thousands of 1987 dollars
(logarithmic scale)
1940
1920
1900
1960
1980
Time
Figure 1.10
©1999 South-Western College Publishing

12. END