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56 Chapter 1 Economic Questions and Data

TABLE 1.2 Selected Observations on the Growth Rate of GDP and the Term Spread in the United
States: Quarterly Data, 1960:Q1–2013:Q1

Observation Date GDP Growth Rate Term Spread
Number (year:quarter) (% at an annual rate) (% per year)

1 1960:Q1 8.8% 0.6%
2 1960:Q2 −1.5 1.3
3 1960:Q3 1.5
4 1960:Q4 1.0 1.6
5 1961:Q1 −4.9 1.4
. .
. . 2.7 .
. . . .
. .
.

211 2012:Q3 2.7 1.5
212 2012:Q4 0.1 1.6
213 2013:Q1 1.1 1.9

Note: The United States GDP and term spread data set is described in Appendix 14.1.

contains observations on two variables (the growth rate of GDP and the term
spread) for a single entity (the United States) for 213 time periods. Each time
period in this data set is a quarter of a year (the first quarter is January, Febru-
ary, and March; the second quarter is April, May, and June; and so forth). The
observations in this data set begin in the first quarter of 1960, which is denoted
1960:Q1, and end in the first quarter of 2013 (2013:Q1). The number of observa-
tions (that is, time periods) in a time series data set is denoted T. Because
there are 213 quarters from 1960:Q1 to 2013:Q1, this data set contains T = 213
observations.

Some observations in this data set are listed in Table 1.2. The data in each row
correspond to a different time period (year and quarter). In the first quarter of
1960, for example, GDP grew 8.8% at an annual rate. In other words, if GDP
had continued growing for four quarters at its rate during the first quarter of 1960,
the level of GDP would have increased by 8.8%. In the first quarter of 1960, the
long-term interest rate was 4.5%, the short-term interest rate was 3.9%, so their
difference, the term spread, was 0.6%.

By tracking a single entity over time, time series data can be used to study the
evolution of variables over time and to forecast future values of those variables.