U.S. Economy Grew Faster Than Expected In 2021
U.S. real GDP grew at a 6.9 percent annual rate in the fourth quarter of 2021. The economy was likely producing around its economic potential in the fourth quarter but was still below its pre-pandemic trend.—Peterson Institute for International Economics
By how much did real GDP grow in 2021?
This data table provides an answer.
In the fourth quarter of 2021, real GDP increased $1,038 billion on its 2020 level ($19,806 – $18,768 = $1,038), which is a growth rate of 5.5 percent. This growth rate is measured over 2021 and is called a year-on-year growth rate.
Why does the news clip say “6.9 percent”?
The 6.9 percent number in the news clip is the growth rate in the fourth quarter of 2021 expressed at an annual rate. Because the fourth-quarter growth rate exceeded the year-on-year rate, we know that real GDP grew faster in the final quarter of 2021 than in the previous quarters.
Did the gap between real GDP and its pre-Covid trend widen or narrow in 2021?
Work through the following graph to see the answer.
In 2021, did potential GDP grow faster or slower than the pre-Covid trend?
In 2021, potential GDP grew slower than the pre-Covid trend. The growth rate of potential GDP was ($19,898 – $19,512) ÷ $19,512 × 100, which equals 2.0 percent, and the growth rate of pre-Covid trend was ($20,074 – $19,633) ÷ $19,633 × 100, which equals 2.2 percent.
Figure 2 shows real GDP, potential GDP, and the pre-Covid trend GDP. By the end of 2021, lost output measured by potential GDP had grown to $3,940 per person.
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