The Great Depression

Have you ever heard the phrase, “a picture is worth a thousand words?” Well that is how economists think about graphs. Graphs allow data to be visualized easily. Graphs also make it easier to see patterns and trends in the data. Examine the graph below. Click the "Zoom" button in the lower left to see a larger view of the Great Depression years, highlighted in yellow on the chart (1929 - 1940).
When you are done with this page, click the Next button on the lower right to move to the first question. Note that on upcoming pages you must first answer each question in order for the Next button to appear.

CPI

Math Talk

The numbers on the Y-axes are the natural logarithms of the level of GDP in year 2000 prices. It is common to use logs on graphs because, with the use of logs, a given vertical distance reflects a specific rate of change in GDP regardless of the specific level (amount) of GDP. If logarithms are not used, then recent changes in GDP would appear much larger in proportion to changes in earlier years because the GDP amounts are so much larger now than they were in the past.

Think about this:

If the GDP of Smithtown was $1000 and the economy grew by ten percent, it would be $100 dollars larger. But in the future, if the GDP of Smithtown was $1 million, and the economy grew by ten percent, it would be $100,000 larger. Notice that the economy grew at the same rate at both points in time, but in dollar terms the second growth rate was much larger simply because the economy itself was larger. The use of logs allows for the comparison of growth rates and makes it easier to visualize the difference between recent experiences and those of the 1930s.

	A.The U.S. economy has grown over time.
	B.The U.S. economy has not grown over time.
	C.The U.S. economy has become smaller over time.

	A. A very bad recession occurred.
	B. There was a period of high unemployment.
	C. The economy was not producing as many goods and services.

	A. Years by decade
	B. Log of real GDP

	A. Years by decade
	B. Log of real GDP