Principles of Economics

Assignment I

Directions to extract the data for Q1-4: Go to RBI website (https://www.rbi.org.in/) -> Statistics ->
Database on Indian Economy-> Statistics-> Real Sector-> National Income-> Quarterly-> Quarterly
Estimates of Gross Domestic Product at Market Prices (at Constant Prices)-> then export it to excel.
Consider the spreadsheet NAS 2011-12. You need to consider the heads - GDP at market price, PFCE
(private final consumption expenditure) and GFCF (gross fixed capital formation) for the assignment.
Data on unemployment rate is taken from economic outlook and has already been attached to the
mail.

Q5: Data source is RBI and economic outlook. Yearly real GDP, inflation rate is taken from the
former, and yearly unemployment rate series is taken from the latter. The data is already attached to
the mail.

Questions

Q1 What is real GDP? Plot the quarterly real GDP growth rate. Does it follow the pattern of business
cycles? 6

Q2 Assume that a recession is defined by two consecutive quarters of negative growth. How many
recessions has the economy undergone over the years plotted in the chart? 6

Q3 Now add to the graph the quarterly unemployment rate.

a) Does the unemployment rate increase during the latest recession you have identified?

b) What was the level of the unemployment rate during the first and the last quarter of negative
growth of the latest recession? Does it continue to increase even if the economy starts showing
positive growth rate?

c) What do you conclude about the link between recession and the variation in unemployment?
6

Q4 Now add to the GDP graph the quarterly percentage change in private final consumption
expenditure (PFCE) and gross fixed capital formation (GFCF).

a) Are the three series moving in tandem, and

b) Which is the most volatile between consumption and investment?

Suggest an explanation for both the parts. 6

Q5 Consider the yearly GDP, inflation rate (CPI percentage change) and unemployment rate of India
given in the excel sheet attached to the mail. Plot the three series in a same graph – Real GDP
growth rate, inflation rate and unemployment rate. Comment on the trends of the indicators. (Do
not give any explanation for the trends. This question only aims to introduce you with the Indian
macroeconomic trends. You will learn the causes or reasons in ensuing courses.)
6

Note: Show the complete working in the excel sheet for the graphs.