Question

8. Following are percentage change of real GDP from the preceding quarter. Q1-2020: \(-1.26 \%\) Q2-2020: \(-8.98 \%\), Q3-2020: \(7.48 \%\), and Q4-2020: \(0.99 \%\) (Hint: Q1-2020 figure means that the real GDP in the US grew at a rate of \(-1.26 \%\) over quarter 1 of 2020 compared to the level of real GDP in quarter 4 of \(2019 .\) ) Given this information, which of the following statements is false?

a) US GDP in 2020 was higher than its level in 2019

b) US GDP in 2020 was lower than its level in 2019

c) In Q2 of 2020, GDP grew at an annualized rate of \(-35.92 \%\).

d) In Q3 of 2020, GDP grew at an annualized rate of \(29.92 \%\).

Answer 1

Adding up the percentage change in real GDP over all the quarters, we can decide whether GDP has grown in 2020 compared to 2019 or has fallen. If the total of the percentages is positive, then we can say that GDP increased in 2020. Otherwise, we will say GDP fell in 2020.
Total percentage change = (-1.26-8.98+7.48+0.99)% = -1.77%

Since overall, in a total of all quarters, GDP grew at a rate of -1.77%. Thus we can say that GDP in 2020 is lesser than in 2019.
ANSWER : (b)
If the sum were positive, then we would say GDP is greater in 2020 than in 2019. Hence A is incorrect.
The above calculation incorrectly indicates options (c) and (d).