In everyday discussion, the word "trend" might refer to a current fad. It can also mean a pattern that is evident from studying past events. In economics, a trend is the long-term movement of an economic measure, such as real GDP. To determine such a trend, economists look at the measure's average rate of increase or decrease over a long period of time. In the case of real GDP for the United States, the trend growth rate of real GDP is about 3 percent annually. The economy can grow at trend—meaning around 3 percent. It can also grow above and/or below trend.
Now that you know the trend rate for the U.S. real GDP is about 3 percent annually, consider the following:
Would 6.8 percent annual real GDP growth indicate that the economy was growing at trend, above trend or below trend during this year?
Let's hear what Mr. Kliesen has to say about trend growth rate.