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3. GDP trend and cycle: See Table 2 which shows UK real GDP per capita. Suppose that the economy was at its trend in 2003. Suppose also that trend growth is one percent per year. Calculate the cycle using the formula Cycle = log (GDP)-log (Trend) In which years was the economy below trend? In which years was the economy above trend? What units is the cycle measured in? What year was the economy furthest above trend? In what year was the economy furthest below trend? If growth in 2015 and beyond was a constant two percent per year, in what year would the economy again be above trend? (Hint: Copy the data into ercel and convert the data into log-evels). EC2002 (2018/19): Tutorial 1 Week 3 Table 2: UK real GDP per capita (£000s) Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 GDP 25.125.6 26.2 26.7 27.2 26.8 25.5 25.7 26.0 26.1 26.5 27.1

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