The government reports that GDP increased at an annual rate of four per cent for the third quarter of 1999. This means that GDP was 4 per cent higher at the end of the third quarter than at the beginning of the quarter.

Question

Quizplus · Accepted Answer

The statement is incorrect. The annual rate of GDP growth refers to the rate at which GDP would increase if the economy continued to grow at the same pace for an entire year. Therefore, a GDP growth rate of 4 per cent for the third quarter of 1999 means that if the economy continued to grow at the same rate for an entire year, GDP would be 4 per cent higher at the end of the year compared to the beginning of the year. It does not mean that GDP was 4 per cent higher at the end of the third quarter compared to the beginning of the quarter.

The Government Reports That GDP Increased at an Annual Rate